Money laundering is no game. Yet, some games have been used for money laundering. That's what prompted Valve to announce that it would end the online sales of loot box "keys" for its game Counter-Strike Global Offensive (CS:GO).
As of last week, Valve indicated that CS:GO container keys purchased in-game can no longer leave the purchasing account. Thus, they cannot be sold on the Steam Community Market or traded. Pre-existing CS:GO container keys are unaffected–those keys can still be sold and traded.
These CS-GO keys have historically been traded on the Steam Community Market as well as third party websites. The keys could be bought with money from the in-game shop or from Steam.
Valve's decision was due to money laundering concerns. In its statement, Valve offered the following rationale:
In the past, most key trades we observed were between legitimate customers. However, worldwide fraud networks have recently shifted to using CS:GO keys to liquidate their gains. At this point, nearly all key purchases that end up being traded or sold on the marketplace are believed to be fraud-sourced. As a result we have decided that newly purchased keys will not be tradeable or marketable.
For the vast majority of CS:GO users who buy keys to open containers, nothing changes; keys can still be purchased to open containers in their inventory. They simply can no longer be traded or transacted on the Steam Community Market.
Unfortunately this change will impact some legitimate users, but combating fraud is something we continue to prioritize across Steam and our products.
Under federal law (18 U.S.C. 1956), it is illegal to conduct financial transactions with the proceeds of unlawful activity with the intent to carry on that criminal activity or conceal the source, true ownership, or control of those proceeds, among other things. For violations of the federal money laundering statute, you may be subject to hefty penalties (up to $500,000 or twice the amount of the property at issue, whichever is greater) and/or imprisonment for up to twenty years.
While we traditionally think of money laundering as occurring through shell companies, hawalas, or even bag-men, the emergence of digital currencies and other digital assets tradeable through some unregulated marketplaces has created a new avenue for money launders.
Just last month, the leaders of three agencies: the U.S. Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, and the U.S. Securities and Exchange Commission (the "Agencies") issued guidance ("Joint Statement") to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA). We wrote about that statement here. The crux of the statement was to remind players in the cryptocurrency and digital assets space of their compliance obligations and highlight the gaps that may exist in these markets. It is not clear if this Joint Statement is what prompted Valve to take this action. However, FinCEN, the SEC and CFTC have made clear that the enforcements will increase and compliance with these obligations is mandatory.
In some virtual games, players may have the ability to earn digital assets and then redeem them on open markets for real money. Similar to how casinos are used to launder money, some digital asset markets, which allow users to sell or trade digital assets for real currency (either virtual or fiat), may provide a path for bad actors to use various anonymous transfers of virtual currency and digital assets to potentially hide the proceeds of financial crimes.
Now is a good time for anyone engaged in tradeable digital assets or digital asset marketplaces to seek advice and reassess the applicability of the BSA to their activities, think carefully about their AML compliance obligations, detect vulnerabilities in their platforms and mitigate their risk stay ahead of the game.
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