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Tech Insight : Laundering Money Via Spotify?

In this insight, we look at how, according to an investigation by Swedish newspaper Svenska Dagbladet (SvD), criminals may have been using Spotify to launder money since 2019.

How? 

The reported money laundering process, which was noticed by analysts from the National Operative Unit of the Swedish Police Force, involved a web of activities using a Facebook group, cryptocurrency payments and the encrypted app Telegram, the digital music streaming service Spotify, artists connected to criminal gangs and the setting up of a label.

The Process 

According to the SvD investigation, here’s an outline of how the criminal network’s money laundering process has been working:

– Bitcoin cryptocurrency is purchased (cash in hand) via a Facebook group.

– The bitcoin pays for fake streams / manipulated streams in order to make a song. For example, bots are used to simulate user behaviour by repeatedly streaming a song. The end-to-end encrypted app Telegram is used to organise the false streaming activities, e.g. using hijacked accounts, and other inauthentic methods (in addition to the bots). Possible other methods for fake streaming (some of which may be used) include click farms, VPN manipulation, algorithmic exploitation, collusive behaviour, paid services (paying others to use these methods), and more.

– The increased popularity / higher ratings of the songs as a result of the fake streams lead to more real plays / actual streams of the songs. With the artist and their labels both being linked to / owned by the criminal gangs, the laundered money then comes back as payouts via Spotify.

Only Worth It For Large Amounts 

Considering the relatively small amounts that artists receive via Spotify plays, it’s been reported that it would only have been worth operating such a process with sums exceeding several million Swedish krona (1mn SEK = approx. €84,000). This also gives an idea of how much money the criminal gangs are making before (allegedly) laundering and how much manipulation of Spotify streams may be taking place (according to reports of the SvD investigation).

How Was It Discovered? 

According to reports, the analysts at the National Operative Unit of the Swedish Police Force were actually listening to music by rappers who had published the music on Spotify since autumn 2021 in order to gather information about crimes from the lyrics. This led to the analysts noticing the unusual streaming patterns.

What Does Spotify Say? 

Spotify has acknowledged that “manipulated streams are an industry-wide challenge” but says it has not been contacted by law enforcement concerning SVD article outlining how Spotify may have been used by criminals for money laundering. Spotify also says that it hasn’t been provided with any data or “hard evidence” that its platform has been used in the way described.

How Many Fake Streams? 

Spotify says that only 1 per cent of its streams are deemed to be artificial, and its systems can detect anomalies before they reach a “significant” threshold.

However, it was recently reported (Financial Times) that there has been a suggestion by JP Morgan executives that as much as 10 per cent of all streams could be fake.

The 30-Second Track Trick 

Unfortunately for Spotify, it has also been in the news having to deny that users may have been fooling its royalty system to make money by using a ‘trick’ involving a 30-second track. It’s been alleged that users can simply repeatedly listen to their own uploaded 30-second track to make royalties. It’s been reported, for example, that analysts at JP Morgan have suggested that Spotify subscribers could make as much as £960 per a month by listening to their song on repeat, 24 hours a day.

Spotify has denied that the 30-second track money-making trick is possible on its platform saying that its royalty system doesn’t work that way.

What Does This Mean For Your Business? 

According to Spotify, the reports about how criminals may have been using its platform for money laundering have not been backed up with evidence and haven’t led to police enquiries. However, although Spotify suggests that fake streams only make up one per cent on its platform, it appears that others (JP Morgan analysts) suggest it could be at a much higher level. The story of the alleged money laundering and the 30-secong track allegations could also appear to suggest that Spotify’s systems may not be as good at spotting and preventing manipulation of the platform as the company thinks/says.

With AI now widely available, the potential for manipulation could be even greater and, no doubt, may be something that Spotify (and other platforms) are having to think about. Fake streaming can damage the music industry and distort ratings, thereby adversely affecting many artists.

It appears, however, that change is on the way, with Universal Music Group and Deezer announcing the joint launch of a music streaming model that’s designed to give more (royalty) money to the artists, which could put pressure on others like Spotify and Apple Music, to follow suit or at least re-examine how their owns systems work.


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