Is Second Life Being Used for Money Laundering? Could it be?
by Alphaville Herald on 03/01/07 at 5:39 pm
Raph Koster has pointed to a sobering post by Kenneth Rijock, on the World-Check site. World-Check is a site that tracks risks world-wide, and Rijock is an attorney who has a rather interesting resume, to say the least:
He has more than 25 year’s experience in the field of money laundering, as a practising laundryman, financial institution compliance consultant, and trainer/lecturer to law enforcement and the intelligence services of both the United States and Canada. After serving as a banking lawyer in an international law firm, he spent the decade of the 1980s as a money launderer and advisor to narcotics trafficking organisations operating in North and South America.
Not addressing Second Life in particular, he raises a red flag about the unmonitored flow of money through virtual worlds *like* Second Life, and envisions scenarios like the following:
-I open 15 to 25 accounts at the virtual universe website, all with counterfeit identification.
-I fund the accounts with narcotics proceeds cash, all patiently deposited at the available ATMs by my smurfs.
-I then purchase some virtual real estate from a co-conspirator, as a partnership of my bogus identities, and funnel all the virtual purchase money into his account.
-The “seller” can then access these funds, either through ATMs, or through a bank. Perhaps I open a small bank account, using bogus ID,and obtain cashiers’ cheques with my now-converted “virtual” profits.
Is this a great way to move criminal profits ? You bet it is. Have they created a ” financial institution” as the term is defined in the USA PATRIOT Act of 2001 ? It would seem that the answer is yes. Let us see just how long regulators and law enforcement allow this scheme to exist before taking action.
The main problem here is that opening an account in Second Life is even easier than Rijock imagines. Any unverified account will do. One wonders if some of the million or so unverified are being used for precisely this purpose already.
Prokofy Neva
Jan 3rd, 2007
Well, yes, SL, your own reporter has sold off the ANWR prim rig and made a dummy corp with a former rogue State Dept. official hehe:
http://www.secondlifeherald.com/slh/2007/01/drilling_for_li.html
Seriously, I’ve seen this scenario played out a few times with some big wheelers and dealers in Second Life. I’ve watched them do exactly this, and not even be so careful with the alt-main fingerprints.
The problem with this concept is that it is a crazy way to try to move around and liquidate large amounts of money. Large amounts of money ALWAYS come to the attention of the Lindens — they have built-in alarms for things now and there is no way you can move large amounts off the Lindex, and into the PayPal, without them slowing it down or even stopping it.
It’s also a slow and painful way to take, say, $10,000, and convert it into something. You’d have to first buy the islands and wait for the delivery for weeks. You’d have to sell the islands, developped, or rent them and wait for the proceeds to trickle in. Then you have to go sell your loot on the LindEx, and wait even more for LL to send it to PayPal.
With that long wait and its many filters, why not just go to PayPal itself directly from a business set up on a web page?
Anonymous
Jan 4th, 2007
Is Second Life Being Used for Money Laundering? Could it be?
Raph Koster has pointed to a sobering post by Kenneth Rijock, on the World-Check site. World-Check is a site that tracks risks world-wide, and Rijock is an attorney who has a rather interesting resume, to say the least:
He has more tha…
Hiro Pendragon
Jan 4th, 2007
Well it seems the problem is the whole reliance on fake IDs. I mean, assuming someone has fake identification to the point where a real bank is giving them accounts, there seems to be larger issues at stake than just pushing L$ around.
blaze@blaze.com
Jan 5th, 2007
Are you kidding? My guess is that the US government would dearly *LOVE* people to use this for money laundering. Like, one query in the database and you suddenly have the whole gang.
Do you honestly thing that LL hasn’t created a UI for the government to query whenever they want? Seriously now…
blaze@blaze.com
Jan 5th, 2007
And, yeah, has it on the head. There is a risk arb api that flags transactions and the fact is, if a 3rd party user let those trans go through they lose every last penny. LL has already taken 1.5 million from SLExchange – no recourse, as reported by Apotheus himself.
And seriously, like LL cares one iota about 3rd party exchanges. They’d rather they just all curled up and died.
No, I’m sorry, I just don’t see anything on the internet as being viable for money laundering. Not unless you want to risk losing everything.
That being said, yikes for Philip if some dumb mobster decides to launder and then loses his L$ …
Cocoanut Koala
Jan 5th, 2007
Good heavens, you’re right. I went to the SLExchange forums and found this out for myself.
Here is the link if anyone is interested:
http://www.slexchange.com/modules.php?name=Forums&file=viewtopic&t=7537&highlight=
coco
Cocoanut Koala
Jan 5th, 2007
Well it didn’t all print. But just look up Apotheosus’ recent comments, and you will find the thread.
coco
Ombrone
Jan 8th, 2007
I do agree with the problem stressed by this article, I had already way to speak about that in Terranova Blog.
Virtual worlds are a very good way to do some money laundering, or to evade some tax.
I had myself some experience about that when I was younger and got working for a finance consultantancy firm, so I know something of the business of ast least evading tax officer….
In a Virtual World u can move your money quite fast, thorugh a long chain of ALT, this make quite long to identify clearly the entry and the exit points of the money especially if they are in different countries!
A good investigation is usually able to track down all the flux of the money, the games is being enough fast to be really far with your money in cash, when police arrive to the last ring of the chain.
Of course building up a chain of bank account is usually a not cheap effort… building up a chain of SL account could be easier and and much more convenient.
I do not think however that money laundering or tax evasion in SL is a real problem now, for the simple reason that the financial flux in the game are still too small to be interesting (as someother pointed out: to be smart you cannot move larger than average quantity of money if not is too easy to discover you), so I guess the effort is not worth the money you can save till now.
But SL is growing, fast, and the problem will (not could, it will) arise.