Money Laundering Poses Risk to India's Online Gaming and Digital Economy

The Indian online gaming sector faces an important threat from money laundering, requiring urgent and exact steps to ensure its sustained success and also taking care of India’s economy, report by Digital India Foundation. 

Money laundering is sometimes done by using illicit funds to purchase in-game currency/items or to play a game. In otherways, they may create user accounts using stolen credit cards or hacked credentials to make these transactions. 

Once funds are placed in the online gaming ecosystem, the beneficiaries engage in countless transactions, creating a web of money transfers to and from entities registered around the world. In doing so, the launderer conceals the audit trail. 

Finally, the money laundering proceeds are reintroduced into the economy. This is done by using the in-game currency to acquire other items that can be sold for real money. 

"The essential measures to be taken are a dedicated task force for illegal operators and the creation of a whitelist of legal operators, combating misleading advertisements, and incorporating principles of financial integrity and international cooperation among others, " the report recommended.

" Other critical measures should include public awareness and education so that users can make informed decisions and avoid platforms that engage in deceptive practices," it added.

Advocating a detailed assessment of in-game assets, the report said that financial institutions should position AI/ML driven detection models, build a strong investigative team and take decisions to combat money rules. 

One of the key mechanisms of money laundering is India’s illegal gambling and betting market which has known deposits exceeding $ 100 billion annually, eased by a critical method.

Between financial year 2020 and FY23, the Indian online gaming segment reported a CAGR of 28%, reaching a market size of Rs 16,428 crore in FY23 and is anticipated to reach Rs 33,243 crore by FY28. The contribution of online gaming to GDP saw a CAGR of 27.5 % from 2019 to 2022.

The Indian Real Money Gaming (RMG) sector, part of the online gaming ecosystem, is giving about 83-84% of its income. As per the report, this sector’s income is expected to reach $7.5 billion within the next five years.         

“With over 400 homegrown start-ups and 100 million daily online gamers, including 90 million who pay to play, the sector employs directly and indirectly approximately one lakh individuals, with the potential to create 250,000 jobs by 2025,” said Arvind Gupta, head and co-founder of Digital India Foundation.

"Despite regulatory efforts to curb illegal operators, many platforms circumvent restrictions through mirror sites, illegal branding, and disproportionate promises, highlighting the pressing need for stronger oversight and enforcement, " he added.