A cyberlocker is a third-party online storage service that allows users to store and share files, such as music, movies, and software. However, cyberlockers have a bad reputation for hosting illegal or harmful content.
If your business includes cyberlockers or you’re considering adding this merchant category, you should be aware of the associated risks. In this blog, we’ll tell you more about cyberlockers, the potential risks for financial institutions enabling transactions associated with cyberlockers, and more.
How cyberlockers differ from other cloud storage services
Cyberlockers are intended for the mass dissemination of content, while cloud storage services like Google Drive and Dropbox are designed to enable a limited group of people with permission to share files, often for business purposes.
Another key difference is that cyberlockers allow users to anonymously upload content, rather than requiring them to set up user accounts. This opens the door for users to upload and access illicit material and content that infringes on intellectual property (IP) rights.
The length of time content is stored also differs between cyberlockers and other cloud storage services. Cyberlockers often delete content that doesn’t generate traffic, regardless of the wishes of the user who uploaded the content. With other cloud storage services, the user has control: content is typically stored until the user deletes it or ends their subscription.
The starkest difference between legitimate cloud storage services and cyberlockers is the types of content they host -- and their attitude toward removing and preventing the dissemination of illicit material. Cyberlockers are known to be hotbeds for the dissemination of child sexual abuse material (CSAM), non-consensual pornography, and other harmful content. They are also notoriously lax about enforcing take-down requests.
Why cyberlockers are considered high-risk
Processing payments for cyberlockers entails several critical risks for banks, payment providers, and other related parties. The FBI has arrested and stifled the activity of various cyberlocker operators. Some cyberlockers have been listed on the US Trade Representative Office’s 2020 Review of Notorious Markets for Counterfeiting and Piracy.
According to Payments Dive, most cyberlockers allow merchants to be paid through “vast networks of subscription sites,” creating the potential for transaction laundering. Since it’s hard for financial institutions enabling transactions to detect links between payments and illegal cyberlocker activity, they are at risk of being flagged (and fined) by card schemes and regulators for anti-money laundering and counter-terrorist financing violations, which can lead to costly fines and reputational damage to their brands.
Cyberlockers and negative media attention
Cyberlockers have been sued in courts for violating copyright infringement laws for more than a decade. In a landmark case in India in February 2023, a Delhi High Court passed an injunction against cyberlockers. In the case, entertainment giant Universal City Studios sued multiple defendants, including Mixdrop.co, alleging that these defendants were responsible for disseminating unauthorized copies of films, television programs, and other copyrighted material.
In the past, some cyberlockers have also been shut down for piracy. In 2016, for example, Putlocker, which The Motion Picture Association reported as a major piracy threat, was temporarily shut down and the website blocked in the U.K. And prior to that in 2012, the U.S. Department of Justice (DOJ) shut down sites associated with Megaupload for alleged copyright infringement.
In 2015, a case by U.S. Assistant Attorney General Leslie Caldwell against the operator of music cyberlocker, RockDizMusic.com, resulted in a a North Carolina defendant receiving a 36-month prison sentence for copyright infringement.
These are just a few of the lawsuits that have been brought against cyberlockers and those operating them.
Mitigating risks associated with cyberlockers
Cyberlockers are vulnerable to transaction laundering, and are often flagged for anti-money laundering and counter-terrorist financing violations. If your portfolio includes processing transactions for cyberlocker content, you must ensure that you have the technology and processes in place to mitigate the risk. EverC can help to identify merchants that are potentially involved in suspicious or criminal activity, even when their activity is purposely hidden. Our technology leverages AI for increased speed and precision in detection rates, enhancements to features and tools, and unmatched customization capability, for solutions that that allow you to meet your business goals while aligning with your RBA and industry priorities.
