Money laundering using virtual worlds, Bitcoin on watchdog's radar

Financial watchdog AUSTRAC says that money laundering using virtual worlds, such as MMOs, and digital currencies, such as Bitcoin, are emerging threats

Image: (Creative Commons)

Image: (Creative Commons)

Law enforcement's response

Chambers-Jones believes that laws have not managed to keep pace with the changing nature of money laundering. “Most convictions are still using out of date cybercrime laws or money laundering laws which relate to the real, not the virtual, world, ” she says

Schmidt says that AUSTRAC and the Attorney-General's Department continue to assess the effectiveness of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and the emergence of new payment methods, such as Bitcoin, is an area that the agency is monitoring.

"The global use of electronic payment systems and new payment methods is set to continue to grow in coming years, as these systems evolve to handle high values and volumes of transactions and broaden in global reach. As their use expands, so does the threat of them being exploited for criminal purposes," Schmidt says.

Existing money laundering legislation can generally be used to prosecute the use of virtual worlds and digital currencies for financial crimes, Dyson says. "We have legislation in relation to the offences being committed online; of course the proceeds that they’re after is the reward at the end... Current anti-laundering legislation could cover it if the objective is to gain legitimate forms of currency at the end."

Chambers-Jones believes that while governments and law enforcement agencies are aware of the potential of virtual world money laundering, there needs to be political will to specifically regulate the area.

"You need to get all countries to agree on a policy and this is going to be incredible difficult to get a consensus on because of the societal difference which underpin legislation," she says.

"You can see that governments are taking the threat more seriously. Criminals will always exploit loopholes and this area is no exception. The law needs to keep pace but political will must be in place before the law has a chance to regulate effectively."

Potential legislative gaps are not the only issue facing authorities, however. The murky jurisdictional boundaries of crimes committed using internet services can make law enforcement tough.

"Jurisdictions and boundaries and borders don’t exist for criminals and in a sense they’re operating in a global environment," Dyson says.

"We really have to, as a law enforcement agency, build very strong networks, which we’re doing with overseas jurisdictions, plus be able to respond rapidly enough to meet that challenge. Criminals with new technologies of course can commit these crimes in a split second — we need to respond much more rapidly than we have in the past to be effective."

"No one country or body regulates and monitors the internet, and therefore no-one can control in the most part what goes on within the internet," Chambers-Jones says.

"However," she adds, "individual countries can use domestic legislation to ensure application of their laws on websites and virtual worlds. When there are clear jurisdictional boundaries — i.e. if a games developer is based in the USA then it will be American laws which should be applied — but nothing is simple and the games developer could have offices in other countries, servers in other countries, and so on and so forth."

Rohan Pearce is the editor of Techworld Australia and Computerworld Australia. Contact him at rohan_pearce at

Follow Rohan on Twitter: @rohan_p

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