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Money Laundering in a Virtual World

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The Palgrave Handbook of Criminal and Terrorism Financing Law

Abstract

Virtual currencies are a key aspect of anti-money laundering regulation. This chapter investigates the UK’s approach to virtual worlds and their virtual currencies, determining whether this currency system is included in national and international money laundering definitions and regulations. Virtual worlds can be a safe haven for criminal activity, such as money laundering, and the lack of sufficient regulation in the UK is one of the pivotal points currently being discussed at regulatory and governmental levels.

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Notes

  1. 1.

    For discussion of Bitcoin, see Chap. 9 (Egan) in this collection.

  2. 2.

    European Banking Authority, Opinion on Virtual Currencies, EBA/Op/2014/08, 4 July 2014, 11.

  3. 3.

    Clare Chambers-Jones, Virtual Economies and Financial Crime: Money Laundering in Cyberspace (Edward Elgar Publishing 2012).

  4. 4.

    Edward Castronova, ‘Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier’ (2001) 618 CESifo Working Papers; Edward Castronova, ‘On Virtual Economies’ (2002) 752 CESifo Working Papers.

  5. 5.

    Mark Bell, ‘Towards a Definition of Virtual Worlds’ (2008) 1(1) Journal of Virtual World Research 1, 2.

  6. 6.

    See Council of Europe, Convention on Cybercrime (2001) ETS 185; Commonwealth Model Law on Cybercrime (2002).

  7. 7.

    Interpol, Cybercrime Fact Sheet (2008) COM/FS/2008-07/FHT-02.

  8. 8.

    Julian Dibbell, ‘A Rape in Cyberspace’ The Village Voice (New York, 23 December 1993) <www.villagevoic e.com/news/a-rape-in-cyberspace-6401665> accessed 28 July 17.

  9. 9.

    MUDs are text-based virtual worlds. For a discussion on this, see Richard Bartle, Designing Virtual Worlds (New Riders 2003) 3–21; Julian Dibbell, My Tiny Life: Crime and Passion in a Virtual World (Henry Holt and Company 1998) 51–65; Gregory Lastowka and Dan Hunter, ‘Virtual Crimes’ (2004) 49(1) New York Law School Review 293.

  10. 10.

    Susan Brenner, ‘Is There Such a Thing as a Virtual Crime’ (2001) 4(1) California Criminal Law Review 3, paras 105–11.

  11. 11.

    Dibbell (n 9) 21.

  12. 12.

    Brenner (n 10).

  13. 13.

    Lawrence Lessig, Code and Other Laws of Cyberspace (Basic Books 1999) 74–78.

  14. 14.

    Orin Kerr, ‘The Problem of Perspective in Internet Law’ (2003) 91(2) Georgetown Law Journal 357, 372–377.

  15. 15.

    ibid. 372–373.

  16. 16.

    Interpol, ‘Virtual Money’ (2010) <www.interpol.int/Crime-areas/Financial-crime/Money-laundering> accessed 28 July 17.

  17. 17.

    ibid.

  18. 18.

    Kerr (n 14) 372–373.

  19. 19.

    Fraud Advisory Panel, ‘Cyber Crime—Social Networks and Virtual Worlds’ (2009) 4 Fraud Facts; Clarke Kiernan Solicitors LLP, ‘Second Life’ <http://clarkekiernan.com/second-life> accessed 28 July 17.

  20. 20.

    For a comprehensive review of money laundering, see Nicholas Ryder, Money Laundering—An Endless Cycle? A Comparative Analysis of the Anti-Money Laundering Policies in the United States of America, the United Kingdom, Australia and Canada (Routledge 2012).

  21. 21.

    Nicholas Ryder, ‘The Financial Services Authority, the Reduction of Financial Crime and the Money Launderer—A Game of Cat and Mouse’ (2008) 67(3) Cambridge Law Journal 635.

  22. 22.

    Financial Action Task Force, Report on New Payment Methods (FATF/OECD 2006).

  23. 23.

    For more information on electronic purses, see Susan Stepney, David Cooper and Jim Woodcock, An Electronic Purse: Specification, Refinement and Proof (Oxford University Computer Laboratory 2000).

  24. 24.

    Heather Desguin, ‘Money Laundering Through Virtual Games’ (2008) Strategic Assessment, Florida Department of Law Enforcement, Office of Statewide Intelligence 17.

  25. 25.

    ibid. 18.

  26. 26.

    US Department of Justice, National Drug Intelligence Centre, Money Laundering in Digital Currencies (2008) 1.

  27. 27.

    ibid. 1.

  28. 28.

    ibid.

  29. 29.

    ibid. 3.

  30. 30.

    US Department of Justice, National Drug Intelligence Centre, Prepaid Stored Value Cards: A Potential Alternative to Traditional Money Laundering Methods (2006).

  31. 31.

    US DoJ (n 26) 4.

  32. 32.

    ibid.

  33. 33.

    ibid. 6.

  34. 34.

    ibid.

  35. 35.

    ibid.

  36. 36.

    See Chambers-Jones (n 3); Robert Stokes, ‘Virtual Money Laundering: The Case of Bitcoin and the Linden Dollar’ (2012) 21(3) Information and Communications Technology Law 221.

  37. 37.

    Richard Heeks, ‘Current Analysis and Future Research Agenda on ‘Gold Farming’: Real World Production in Developing Countries for the Virtual Economies of Online Games’ (2008) 32 Working Paper (Development Informatics Groups, Institute for Development Policy and Management, University of Manchester).

  38. 38.

    ibid.

  39. 39.

    Ung-Gi Yoon, ‘Real Money Trading in MMORPG Items from a Legal and Policy Perspectives’ (2008) 1 Journal of Korean Judicature 418.

  40. 40.

    Jin Ge, ‘Chinese Gold Farmers in the Game World’ (2006) 7(2) Consumers, Commodities & Consumption <http://csrn.camden.rutgers.edu/newsletters/7-2/jin.htm> accessed 28 July 17.

  41. 41.

    Heeks (n 37).

  42. 42.

    United States v Real Property et al. [2011] US CoA 11-6064.

  43. 43.

    For a good discussion on prepaid cards, see Courtney Linn, ‘Regulating the Cross-Border Movement of Prepaid Cards’ (2008) 11(2) Journal of Money Laundering Control 146.

  44. 44.

    See PatrickPetty.com, ‘Update: Robert Hodgins is Still Wanted by Interpol; Co-defendant in Narcotics Probe with Link to AdSurfDaily Case Sentence to Prison; Colombian Drug Business Used Dame Debit Card as ASD’ PatrickPetty.com (15 August 2010) <http://patrickpretty.com/2010/08/15/update-robert-hodgins-still-wanted-by-interpol-co-defendant-in-narcotics-probe-with-link-to-adsurfdaily-case-sentenced-to-prison-colombian-drug-business-used-same-debit-card-as-asd/> accessed 28 July 17.

  45. 45.

    Brian Monroe, ‘Virtual Worlds Clear and Present Danger for Money Laundering’ Fortent (26 April 2007) <www.world-check.com/media/d/content_pressarticle_reference/Virtual_Worlds_Clear_and_Present_Danger_for_ Money_Laundering.pdf> accessed 28 July 17.

  46. 46.

    ibid.

  47. 47.

    ibid.

  48. 48.

    ibid.

  49. 49.

    See Financial Conduct Authority, Financial Crime: A Guide for Firms. Part 1: A Firms Guide to Preventing Financial Crime (FCA 2015). For more on money laundering and the FCA, see Financial Conduct Authority, Money Laundering and Terrorist Financing (FCA 2015).

  50. 50.

    Financial Conduct Authority, Handbook (FCA 2013), SYSC 3 Systems and Controls.

  51. 51.

    See ibid. SYSC 6.3.

  52. 52.

    Financial Conduct Authority, Anti-Money Laundering Annual Report 2013/14 (FCA 2014).

  53. 53.

    For discussion in the context of Bitcoin, see Chap. 9 (Egan) in this collection.

  54. 54.

    FCA (n 52) 12.

  55. 55.

    FATF, Virtual Currencies: Key Definitions and Potential AML/CFT Risks (FATF/OECD 2014); FATF, Guidance for a Risk Based Approach. Virtual Currencies (FATF/OECD 2015); European Banking Authority, ‘EBA Opinion on Virtual Currencies’ EBA/Op/2014/08, 4 July 2014.

  56. 56.

    FATF (n 55) 3.

  57. 57.

    ibid. 4.

  58. 58.

    European Banking Authority (n 55) 10.

  59. 59.

    Financial Services Authority, Reducing Money Laundering Risk (FSA 2003), Discussion paper 22; UK Government, Money Laundering Regulations, Money Laundering Regulations. Your Responsibilities (2013).

  60. 60.

    FATF (n 55) 10.

  61. 61.

    ibid.

  62. 62.

    FATF, Guidance for a Risk Based Approach. Virtual Currencies (FATF/OECD 2015) 6.

  63. 63.

    European Banking Authority (n 55).

  64. 64.

    ibid. 32.

  65. 65.

    ibid. 32–33.

  66. 66.

    Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Australia). For discussion of the Australian AML framework, see Chap. 13 (Chaikin) in this collection.

  67. 67.

    FATF (n 62) 21.

  68. 68.

    FATF (n 55) 15.

  69. 69.

    ibid.

  70. 70.

    ibid. 18.

  71. 71.

    ibid. 19.

  72. 72.

    ibid.

  73. 73.

    ibid.

  74. 74.

    ibid. 20.

  75. 75.

    ibid.

Author information

Authors and Affiliations

  1. University of the West of England (UWE), Bristol, UK

    Clare Chambers-Jones

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  1. Clare Chambers-Jones
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Editors and Affiliations

  1. University of Sussex, Falmer, United Kingdom

    Colin King

  2. University of Leeds, Leeds, United Kingdom

    Clive Walker

  3. Notre Dame Law School, Notre Dame, IN, USA

    Jimmy Gurulé

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Chambers-Jones, C. (2018). Money Laundering in a Virtual World. In: King, C., Walker, C., Gurulé, J. (eds) The Palgrave Handbook of Criminal and Terrorism Financing Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64498-1_8

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