By <0747469 >
A dissertation submitted in partial fulfillment of the requirements for the degree of:
Master of Science in
Submitted to the School of Computing Compu ting Information Technology Technology and Engineering University of East London On <26.05.2009>
Supervisor:
Cyberlaundering
Table of Content Proposal for Dissertation Module (CNM015).....................................................................4 Acknowledgement...............................................................................................................6 Abstract................................................................................................................................7 Chapter One: Introduction...................................................................................................9 1.1 Money laundering in the Past, Present and Future...................................................9 1.2 The Preventive Implementation by the Governments............................................10 1.3 The Preventive Implementation by the Financial Institutions ...............................10 1.4 The Preventive Implementation by the Department of Justice...............................10 Chapter Two: Different ways to achieve Cyberlaundering................................................12 2.1 Stages of the Process of Cyberlaundering..............................................................13 2.2 Models of Payment Systems in Cyberspace...........................................................15 2.2.1 Positive factors for using cyber-based payments..............................................16 2.2.2 Negative factor for using cyber-based payments..............................................16 2.3 Techniques used in Cyberlaundering......................................................................16 2.3.1 Online Banking.................................................................................................17 2.3.2 Internet Gambling.............................................................................................20 3.1 Preventive Measures for Cyberlaundering by the Government..............................25 3.1.1 Federal Bureau of Investigation........................................................................25 3.1.2 National Accountability Bureau........................................................................26 3.1.3 Drug Enforcement Administration....................................................................27 3.1.4 Serious Organised Crime Agency.....................................................................27 3.2 Financial Institution Preventive Measures for Cyberlaundering............................29 3.2.1 Financial Crimes Enforcement Network..........................................................29 3.2.2 Financial Action Task Force.............................................................................29 3.3 Preventive Measures for Cyberlaundering by the Department of Justice...............30 3.3.1 Legislation.........................................................................................................30 3.3.2 The Laws that are related to Cyberlaundering..................................................31 3.3.3 The Money Laundering Offences.....................................................................32 3.4 How Can We Prevent It?.........................................................................................34 Chapter Four: The Strength and Weakness of Different Strategies. .................................36 4.1 Strength of Strategies..............................................................................................36 4.1.1 Financial Reports..............................................................................................36 4.1.2 Follow the Money.............................................................................................36 4.2 Weakness of Strategies............................................................................................36 4.2.1 Millions of Transactions in a Day.....................................................................36 4.2.2 It is hard to identify an Army of Smurf.............................................................37 4.2.3 Slow processing due to Jurisdictional Differences...........................................37 4.2.4 There are many ways of Exploiting Internet ....................................................37 4.2.5 Cash Based Business and Services...................................................................37 4.2.6 Problem of Time and Space..............................................................................37 Chapter Five: Case Study of Virtual World World Second Life. ......................................... .................... ............................. ........39 39 5.1 Business in Second Life..........................................................................................39
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Cyberlaundering 5.2 Problem and Limitation..........................................................................................41 5.2.1 An Army of Smurf............................................................................................41 5.2.2 Anonymity.........................................................................................................41 5.2.3 Open Source......................................................................................................42 5.2.4 Tax Evasion.......................................................................................................43 5.2.5 Fast-growing economy is lightly controlled ....................................................44 5.2.6 Linden Exchange lacks even basic Regulations...............................................44 5.3 Solution and Analysis.............................................................................................45 5.3.1 An army of smurf .............................................................................................45 5.3.2 Anonymity.........................................................................................................46 5.3.3 Open Source......................................................................................................47 5.3.4 Tax Evasion.......................................................................................................49 5.3.5 Fast-growing economy is lightly controlled ....................................................50 5.3.6 Linden Exchange lacks even basic Regulations...............................................50 Chapter Six: Evaluation.......................................................................... ...................... ............... ...........52 ....52 6.1 The Future...............................................................................................................52 6.1.1 Electronic Payments..........................................................................................52 6.1.2 E-Cash...............................................................................................................53 6.2 Conclusion..............................................................................................................54 6.3 Recommendations...................................................................................................57 Appendix A (Definition of concern Laws).........................................................................60 Reference and Bibliography..............................................................................................67
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Cyberlaundering
Proposal for Dissertation Module (CNM015) Topic of Interest:
Cyber laundering.
Introduction: Cyber laundering causes a severe damage to the economy of the society that has a calculated inward and outward remittance to manage the economy. The financial products are always there to provide any need to transfer goods and services from one society to another. Any means other then the provided ways to transfer goods and services using cyber space technologies and information systems for personal benefits using deception is considered as cyber laundering. Aims: •
Why there is a need to control this issue (cyber laundering damages) or the impact of Cyberlaundering.
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Existing laws related to cyber laundering. (legal issues)
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Comparison of the Strengths and Weakness of different Strategies to prevent Cyberlaundering.
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Review of Systems and Technologies used for accomplishing the task of cyber laundering.
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Review of National and International controls to prevent cyber laundering.
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To discuss a practical application of Cyberlaundering in Virtual World.
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Cyberlaundering Objectives: On completion of the dissertation I will be able to: •
Demonstrate a critical understanding of the concept of Cyberlaundering
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Demonstrate a critical understanding of the procedures an d techniques to employ when investigating Cyberlaundering.
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Demonstrate a critical understanding of laws related to C yberlaundering and able to compare strength and weakness of the existing legal process.
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Demonstrate an understanding of systems and technologies to preven t Cyberlaundering.
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To investigate the effectiveness of the current legislation with regards to the Cyberlaundering.
Methodology: My approach to complete this dissertation paper is to use Spiral Methodology. I will research about Cyberlaundering using the library books, articles and internet. First the definition of the topic will be explained briefly. The affecter’s will be elaborated to emphasis on the need to have a control over the issue of Cyberlaundering. Then we will look at the laws related to the Cyberlaundering. Then the systems and technologies that assist Cyberlaundering will be covered. Once ample knowledge of the topic is at hand a Case Study will be discussed to examine the practical application providing fertile ground to support launders. Based on the findings of research and case study any possible improvements to prevent Cyberlaundering will be highlighted. Rationales: Although much have been done in the past to prevent money laundering but still the bad guys find a convenient way to transfer huge amount of money from one place to another electronically. In this dissertation paper I will try to present both strengths and weakness to prevent electronic money laundering or Cyberlaundering from governmental, judiciary and technological point of views.
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Cyberlaundering
Acknowledgement
Acknowledgement is due to University of East London for the Support of this project. I wish to express my appreciation to Mr. David Seth Preston and Ms. Tricia Webb who served as my major advisor. I also wish to thank the dissertation coordinator Dr. Hossein JahanKhani and the other members of my evaluation committee.
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Cyberlaundering
Abstract
Cyberlaundering is a new way to hide the proceeds of crime and the advance technological solutions of electronic payments and online gambling has eliminated the need for time and space as compared to the traditional way of money laundering to achieve Cyberlaundering. Governments of the world are working together to prevent Cyberlaundering. They have developed a standard (Forty Recommendation) by which all the governments of the world need to provide some form of control to prevent money laundering both traditionally and electronically. Financial Institutions are required to provide suspicious activity report and any transaction above the value of 10,000. An advance reporting software is used for this purpose that eliminates the need to prepare the SAR’s without human intervention by sixty percent. Department of Justice has provided legislation to enable the law enforcement agencies to monitor and keep record of internet activity for at least twelve months. This legislation will enable the law enforcement agencies to investigate any such cases of Cyberlaundering. While the penalties of the Cyberlaundering offence are more or less parallel to the money laundering and can be imposed by the general principle of justice. Cyberlaundering can be achieve in three stages and FATF has identifies certain choke points unavoidable by the launders which is the key to prevent and control Cyberlaundering. Although the cyber-payments seem to be the fastest and easiest way to move the funds but there are certain disadvantages as well. There are four models of cyber-payments and the non bank payment model is of more concern to our interest then the other three models.
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Cyberlaundering The two techniques that I have highlighted in this dissertation are Online Banking (not same as internet banking) and Online Casinos. Both of the techniques are widely used and are still unregulated. Preventive Measures by the Government Institutions such as FBI (US), NAB (Pakistan), DEA (US) and SOCA (UK) has provided the necessary controls using the present technology to combat this global phenomenon. The preventive measures by financial institution such as FinCEN (US) and FATF has established a global reporting system to report Suspicious Activity, foreign transactions and they have set standards to control and investigate any such case of money laundering and also to provide relevant information to the law enforcement agencies. Department of Justice has provided the legislation such as EC Directives and USA Patriot Act to monitor the internet activity and keep the record for twelve month of all the users in US and its Allies. At the same time penalties have been introduced for offences related to Cyber Crime. I have highlighted some of the strengths and weakness of different strategies implemented to control Cyberlaundering in the present era. There are certain gaps that have been highlight in this dissertation report. A case studies of Second Life virtual world is presented to shed light on the possibilities and prospects available for the cyber launders to exploit using this advance technological solution to give a practical example of the existence of Cyberlaundering Finally the future of online banking, electronic payments and online casino is given and in the last the evaluation and recommendation is given in the conclusion part of this dissertation report.
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Introduction
Cyberlaundering
Chapter One: Introduction There are different ways to transfer money from one place to another such as wire transfer, postal orders, traveler’s cheque, bank draft, electronic transfer and also traditional way and that is the physical carrying of money to other places. Off course this is the normal ways but there are other ways that are used to hide the money exposure and that is what we are interest to explore and not just explore but find ways to prevent them as well. For example on online auction site there are items that are worth only one dollar but the bid on that item goes to 1000 dollars and this way a lot of black money is put back in to the financial system converting it into white money. The reason to prevent Cyberlaundering is numerous for example over throwing governments, turning black money into white money, financial frauds, hiding the source of income, drug dealing and black market of weapons of mass destruction and last but not the least it is because of the gains involved in this business. First we will review of the existing government strategies to prevent Cyberlaundering in some detail. Then review of financial sector strategies to prevent these phenomena will be examined. Finally the legal process, legislation, case studies and judicial counter measures will be covered. 1.1 Money laundering in the Past, Present and Future.
Cyberlaundering is a subset of money laundering and money laundering is a process of concealing crime and converting the proceeds of crime in to legitimate wealth. The bad guys are adopting this technique due to the reason that the modern technology is facilitating the financial institution in a very fast pace then the traditional way of money laundering.
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Introduction
Cyberlaundering
The processing speed of the technology is upgrading every six months while it take years to investigate and prosecute any case of money laundering. The legislation are their in every country except a few but the phenomena of investigation from jurisdiction to jurisdiction takes a lot of time and manpower. The online currency is still an open door for the criminals to take advantage of the fact that they can avoid human interaction and do their business online with out declaring the source of the money. 1.2 The Preventive Implementation by the Governments
Governments all around the globe is required to monitor and report any suspicious activity with regards to money laundering both inside the government institutions and also in the public limited companies. Due to the fact that this phenomenon is of global scale, a well coordinated and combine effort is required to deal with this issue to control and prevent it. Seriously organized crime agency a UK based agency is also in the process of joining hands with all the other countries to cooperate and help to control this crime of money laundering. 1.3 The Preventive Implementation by the Financial Institutions
The technological products such as prepaid cards, e-cash, swipe cards, e-gold and online banking has introduced a number of opportunities for the criminals to hide their identity or use some one else’s identity to do a transaction and get away with it before being catch. Financial institution are required to submit suspicious activity report to the financial monitoring agencies and also required to know their customer through customer due diligence also called know your customer (KYC). Suspicious transaction means that a customer transaction that does not fit into his profile or a foreign transaction that is relatively unusual. 1.4 The Preventive Implementation by the Department of Justice.
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Introduction
Cyberlaundering
Finally the department of justice is trying to encircle the issue of money laundering / Cyberlaundering through introducing several laws to deal with this issue and also imposing penalties and imprisonment over different offences related to money laundering / Cyberlaundering. The introduction of internet policing and e-crime unit is a good start to control the issue of Cyberlaundering along with other e-crime to bringing the criminals to justice.
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Different ways to achieve Cyberlaundering
Cyberlaundering
Chapter Two: Different ways to achieve Cyberlaundering Cyberlaundering can be achieved through directly interacting with the financial institution by presenting the identity in a way to hide the real intent (i.e. Cyberlaundering) through that financial institution. There are five classes of such dealings that are classified in relation to the issue of Cyberlaundering and are given as follows [6]. “Concealment within Business Structures; Misuse of Legitimate Businesses; Use of False Identities, Documents, or Straw Men; Exploiting International Jurisdictional Issues; Use of Anonymous Asset Types;” However there is another way of achieving Cyberlaundering and is termed as indirect way or a way to avoid direct dealing with the financial institution to protect the transaction from being reported to financial agencies and that is the hawala system or alternate banking remittance. In addition to this system of remittance there are other products that can be used to achieve Cyberlaundering and they are listed as follows. “E-Cash, Online Auctions, Bankruptcy frauds, Telemarketing fraud, Operation Cyber Sweep, Cyber terrorism, Online Banking, Iraqi internet scam, E-gold and Online Casinos” [4] Cyberlaundering is mostly all about the indirect way of dealing with the financial institution. Doing the job fast without drawing any unnecessary attention to the fact that the money is not linked to an authentic or legitimate source. In the words of Nick Kochan “He describes about Cyberlaundering as the potential for easy and convenient laundering through e-auctions, online casinos, and telemarketing is all too real to ignore. The lack of a paper trail and government control makes this channel a tempting one for the goons to abuse, as they do” [4].
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Different ways to achieve Cyberlaundering
Cyberlaundering
A number of countries like USA, UK and Canada have advance level of check and balance but the majority of the countries still lack in infrastructure to monitor and control the Cyberlaundering and also the laws are not yet implemented to bring the criminals to justice. 2.1 Stages of the Process of Cyberlaundering
The process of Cyberlaundering can be achieved by the three stages which is in contrast to its super set that is money laundering and the three stages such as placement, layering and integrity are explained below. Placement
In the stage of placement electronic cash is used to buy goods to be resold which can be achieved by means of smart cards. Thus removing the need to involve any intermediary between the two parties require exchanging the money with the facility of anonymity. “Electronic money (or e-money) is money that is represented digitally and can be exchanged by means of smart card from one party to another without the need for an intermediary. It is anticipated that e-money will work just like paper money. One of its potential key features is anonymity. The proceeds of crime that are in the form of e-money could be used, to buy foreign currency and high value goods to be resold. E-money may therefore be used to place dirty money without having to smuggle cash or conduct face to face transactions” [9]
The illegal money in the form of smart cards can be used in online casinos or to buy egold without even proving that the identity is authentic, this can be a source to convert dirty money in to legitimate in the form of refund from a casino in the same area or in a different area where the jurisdiction is less tolerant or have no check on the gambling activities.
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Different ways to achieve Cyberlaundering
Cyberlaundering
Layering
In the stage of layering the criminal tries to separate the money from its origin by transferring the money through a number of accounts in different banks in the disguise of purchase of goods for re-sale or through off shore companies located in different jurisdictions. In this stage the criminals are more likely to be facilitated by the use of internet which if permits to open an account without linking to any authentic proof of identity and any traditional bank account. With this features the criminals can hide there identity or they can use a fake identity to open a bank account. The transfer of funds from one jurisdiction to another leaves extensive audit trails. But the investigation in to a transaction to be legitimate requires a lot of man power and time compared to the instantaneous nature of the electronic transfer of money. Layering could be achieved much easier if the bank supports transfer of funds that deal with e-money. Then the source of income is virtually untraceable for some types of emoney transaction using the anonymity features that available with most of the plastic cards available in the market. Integration
In the stage of integration the owner need to make sure that the accumulation of illegal wealth should not appear to be so; rather it should appear legitimate. There are a number of ways to achieve that, the traditional way involves false invoices of goods while the other way is to open a shell company that render a service such as internet service provider.
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Different ways to achieve Cyberlaundering
Cyberlaundering
Open a bank account for this shell company and you don’t even need to render service but rather use this shell company to make it appear that the services are being provided in return of payment of funds that have passed through layering process. This way the wealth of the owner looks legitimate which can be said as the profit of the service provider. The later technique to provide a legitimate appearance to the funds has a greater scope then the traditional technique. As the traditional technique would require to be of limited use as the services can only be rendered in a limited geographical location while the internet service provider can be bared from this limitation and hence the profits can be far more then the traditional technique. One more benefit to opt for the later technique is the reduced suspicions if the funds are transferred from foreign ban ks. 2.2 Models of Payment Systems in Cyberspace
While searching materials for the dissertation report I found this article on the website of World Bank [10] it seem an important topic to add in this dissertation. Internet facilitates cyber-based payments and because of the anonymity feature it facilitates laundering of funds. Other features to attract money laundering are the lack of regulation and movement of funds across jurisdiction to jurisdiction without interception. It is not difficult to rack the suspicious transaction but the fact that the investigation lags behind the trace of a transaction while the perpetuator is long gone or has hidden there identities or moved from one jurisdiction to another. This World Bank article described four models of cyber based payment systems the system that is growing exponentially and that facilitates the money laundering capabilities is the non-bank and peer-to-peer model. The four models are as follow: The Merchant Issuer Model: This model deals with the case of same entity that is both the issuer and the seller. E.g. Oyster card used by the Transport of London.
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Different ways to achieve Cyberlaundering
Cyberlaundering
The Bank Issuer Model: This model deals with the case that the issuers are separate entities from the merchant. This model is connected with the traditional financial system. E.g. Debit card used by account holders of any bank. Non-Bank Issuer Model: This model deals with issuer giving e-cash in exchange of traditional funds and spending this e-cash at participating merchants. E.g. Virgin pre-paid card and Freedom Eagle Cash Card. Peer-to-Peer Model: This model deals with e-cash that is transferable between users. Point of contact with the transitional financial system is when the e-cash is issued and when it is redeemed. E.g. PayPal funds transfer services.
2.2.1 Positive factors for using cyber-based payments
The benefits of using cyber based payments system is the increase of confidentiality between the parties of an agreed transaction while at the same time chances of identity theft also decreases. As we have analyzed that there are multiple methods of payments this gives the option of user friendliness and more control. The presence of a central server ensures the smooth running of the transaction. 2.2.2 Negative factor for using cyber-based payments
The drawback of this system is the infrastructure required with a constant need to be updated. This is the main reason of the high cost for the users in order to maintain the effectiveness of the cyber based payment system. Another factor that is important to bear in mind is that the company maintaining the cyber based payment system gathers too many records about the users due to the architecture of the system. 2.3 Techniques used in Cyberlaundering.
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Different ways to achieve Cyberlaundering
Cyberlaundering
Business Areas that are affected by Cyberlaundering or under the threat of Cyberlaundering are [7] Commercial banks, Credit unions, Post office, International business, Stock brokers / mutual fund practitioners, Insurance companies and the industries that are vulnerable to Cyberlaundering are [8] Online Banks and Internet Gambling. Let’s review the techniques used in Cyberlaundering. 2.3.1 Online Banking
Online banks are under the threat of Cyberlaundering due to the introduction of internet banking. Cyberlaundering threats the online banks in two ways. One way is that the account holder can be assisting the process of Cyberlaundering in the phenomena called “smurfing” (explained below). Secondly internet as a means of opening an account without verifying the identities of their customer imposes a greater threat which criminals exploits to hide their identity. A recent report [37] about the rise in the online banking fraud illustrated the vulnerability of on-line banking. The fraudster uses key logging viruses to record passwords and credit card numbers. This virus finds it way to users of online banking generally by clicking a link in junk mails. This way criminal took over other peoples account which is termed as card ID theft. This is precisely how online banking will be used by cyber launderers. Online banking is regulated by the policies of the banking regulations that require knowing your customer and their business. Banks are required to report any suspicious transaction to the law enforcement agencies. The criminals can easily avoid such restrictions by opening online accounts with so many unregulated electronic banking companies that use electronic payment systems to provide online banking like functionalities with the added layer of hidden transaction. With the introduction of prepaid cards the criminals can be utilizing the anonymity feature of the card to help the layering and integrity stage of Cyberlaundering. The peer to peer model of the payment system enables the criminal to move the electronic cash from one card to another card without even getting any attention from the law enforcement agencies and without the need to report such transaction by the unregulated online banks.
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Different ways to achieve Cyberlaundering
Cyberlaundering
The problem with the regulation of the online banks accounts is that the jurisdiction of the website where it is registered does not require following any international standard of regulation regulation to run an online bank. A lot of the countries countries are still still not cooperating cooperating with the intern internati ational onal treaty treaty to share share intell intellige igence nce and suspic suspiciou iouss transa transacti ction on record recordss with with the member countries to monitor and control Cyberlaundering. The tech technol nologi ogical cal advan advancem cement ent in the the encry encrypti ption on of prog progra rams ms that that are are used used to communicate and transfer electronic funds providing the confidentiality, integrity and accessibili accessibility ty to hide the informatio information n from law enforcement agencies agencies and are immune to current Anti –Money laundering efforts made by the federal government of U.S. the result is that the transaction is both unlinkable an d untraceable. The electronic banking over the borderless environment of the World Wide Wide Web Web provides the internet breath of reach and with the cost effectiveness of the medium it is the number one choice for the criminals to manipulate the technology to further their aims. Due to the wide difference in the regulation, policies, standards and opinion about the Cyberlaundering it is still an undecided issue that under which jurisdiction a criminal will be prosecuted if the online banking account is based in China and you live in Pakistan and your main banking relationships are in the India, Iran and Malaysia. Criminals buy cheaply available fake identities from hackers to use these identities to open accounts with electronic electronic banking websites to accomplish accomplish the placement placement and layers layers stages of Cyberlaundering. Criminals can host scam website to spoof the users of this website and use the details of the users to hide their identities while requesting a prepaid card or a smart card and deposit the criminal gains to these cards to accomplish the layering and integrating stages of cyber laundering. One important aspect of the electronic banking is that they are not the regulated banks like the once we have in the corner of the street. They only provide flowing of funds from one user to another regardless of the geographic location of the other user. Hypothetical case example of the Army of Smurf (Smurfing).
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Different ways to achieve Cyberlaundering
Cyberlaundering
The question of how, who, where and what requires that the criminal stay ahead of policies in place by the authorities to prevent Cyberlaundering the criminal proceeds. For hiring the services of legitimate people for Cyberlaundering task online job posting sites such as gumtree dot com and many other job sites can be used to attract the attention of people generally willing to earn extra cash. ca sh. These people are called army of smurf. There are two categories of smurf first category is people with criminal intent and second category is people with criminal background. Criminal background These people can be hired from pubs, betting venues, through illegitimate access to public record of fraudulent personalities, people from foreign background, people with little or no moral standards for others, people seeking luxuries life style without much effort, dodge professionals such as solicitor/ex-bankers that knows the system well and can advise an alternative alternative to avoid attention attention from the authorities, authorities, people with with creative mindset but destructive intent such as the criminals on the street corners and many of them can be found in online chat room. Criminal intent These people are basically needy people who are not satisfied with whatever they have for example students that have no access to public fund but require to do retail jobs overtime any time all the time to make extra cash. Another type of people is those who are lazy workers that want to earn more with less effort. For example people living on benefit system they do not want to work hard jobs like night shifts or weekend shift. Others that come in this category are young people on low income scale; women with an appetite of shopping unnecessarily are always in need of extra cash and anti government party workers with an aim to destabilize the political p olitical government.
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Different ways to achieve Cyberlaundering
Cyberlaundering
How: Both categories can be hired by cash-in-hand arrangement or registered charity organi organizat zation ion with with hidden hidden agendas agendas for example example “commo “common n purpos purpose” e” which which is famous famous charity organization for its hidden agenda. Who: The details of each person can be managed by managers willing to assist the business transaction of small amounts through online banks (electronic payment service) on account of cyber-launderer these managers will maintains the details of people willing to participate in return of some extra cash. c ash. Wher Where: e: Th Thee mana manager ger will will meet meet thes thesee indi indivi vidu dual alss pers persona onall lly y to eval evaluat uatee the the risk risk associated with trust and after achieving a certain level of trust they will give them the instruction about the plan of task. These instructions will be given by anonymous emails with a preplanned code that is known to the individual beforehand What: As it is mentioned in section 2.3 [11] the individuals will be provided with details of charged cards that are preloaded with electronic cash through an encrypted software file and that will be used to deposit the instructed amount in an apparently unconnected transaction of paying monthly fee of an internet service provider 2.3.2 Internet Gambling
While researching for the online casinos or gambling sites the Google search engine returned almost 18 million links which show the growing popularity of online betting sites. Internet Gambling or online casino helps the layering and placement of illegal funds and is therefore ideal technique for Cyberlaundering. The traditional casino accepts cash and issues chips for the user to play games. There is a loss of funds while playing the games in the casino but the gain is the fact that the refund will be accepted accepted as legitimate instrument to be deposited in any bank and the source is known to be the casino.
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Different ways to achieve Cyberlaundering
Cyberlaundering
The affect of Cyberlaundering on the depository service providers are in a legal sense because of the need for putting up a system to deter the transfer of illegal funds and reporting suspicious transaction in compliance of The Money Laundering Regulations 1993 (Appendix A). In conjunction to traditional casinos, online casino sites are also regulated within U.S since the introduction of Internet Gambling Prohibition Act (Appendix A). But the phenomena of borderless environment of the internet impose a hurdle to such regulations and the growing popularity of online casinos proves the fact that this channel of electronic movement of fund from one location to another is still a ripe to be abused by the goons. In addition it is hard to obtain the records that may be needed as evidence for any prosecution due to the reason that the online casino website is based offshore. Having a physical address over the internet does not really mean that some thing exist their. Due to huge financial support from the criminals these online casinos some times operates anonymously with out the need to have a physical address (IP-address) and to register this anonymity on the internet the owners of the online casino pays huge monthly and annual fees to the government of that country. Due to the non-existent background checks by the jurisdiction of these online casinos website it is difficult to regulate this market to restrict Cyberlaundering. Another fact is the use of corruption to further the cause of Cyberlaundering by the owners of the online casinos by hiring agents that help assist to achieve Cyberlaundering by the process called smurfing. In this process the owner can give the agents some cash to credit to his account with the online casino to play a few games and then cash out the total money minus commission money from the casino as agreed while the owner can have the rest of the money declared as business profit.
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Different ways to achieve Cyberlaundering
Cyberlaundering
One important fact associate with these phenomena is that there is no need to provide information regarding the relevant technologies only a hand full of experts can accomplish the task of Cyberlaundering on behalf of criminals. One such example is the drumming up business scenario [11] in the scenario the criminal is the owner of an online casino and hires an army of fifty smurf that can create fifty or more email addresses each. The criminal has e-cash which he has aggregated through the process of placement using smartcards and sends this e-cash to the server maintaining the list of each email created by his army of smurf’s. Without coincidence the army receives this e-cash and uses it to play games on the online casino. With this activity the owner gathers all the money back to his account in the form of winnings revenue from unrelated several different parties. Hypothetical case example (How Does It Works)
In section 2.3 (internet gambling) it is shown that how drumming up business scenario can be used to achieve Cyberlaundering. Let us further examine how the funds are actually transferred from a country which has strict laws in place to prevent money laundering to a country that has no laws to prevent money laundering. The products like PayPal prepay cards does not require to have a bank account and thus can be acquired on false identities. These prepay cards can then be loaded with unlimited cash. The technological solutions are already there for the criminals to further their aims. Who: Sam is living in UK and he is a drug dealer. The proceeds of crime are required to be converted into legitimate wealth. So Sam hires an agent Jameel in Pakistan who runs an online casino website that has a merchant account in a local bank called bank alfalah. Sam asks Jameel to arrange 50 fake account using forged or fake identities which can be acquired from a hacker on the internet through anonymous email. Jameel hires an army of smurf to perform this business transaction. The hiring of the interested candidate can be achieved as previously shown in the army of smurf section.
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Different ways to achieve Cyberlaundering
Cyberlaundering
Where: Sam arranges 500 charged cards from different shops loads these charged cards with 100 pounds each using ATM machines, post offices and paypoint facilities. He then securely sends the detail of all the cards to Jameel through encrypted software Jameel decrypt the details and distributed the card details to each one of the smurf with a ratio of 10:1. What: The smurf’s then creates false accounts in Jameel’s online casino and play games there losing all the funds minus commission to Jameel casino which is then deemed as winnings of the online casino for Jameel. Jameel sends this money in monthly installments thought bank transfer to Sam for rendering services of promoting the online casino Website in UK. In the same way Sam can have more then one agents working for him in different countries to further his drug business and networking with other criminals.
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What’s being done to prevent Cyberlaundering
Cyberlaundering
Chapter Three: What’s being done to prevent Cyberlaundering? What are the government, financial institution and department of justice doing to prevent Cyberlaundering? And how to combat the techniques used to electronically launder funds is the main theme of this chapter. Electronic banking that provide ripe to abuse by the launders can be confronted by developing an encryption key recovery program [38]. In this program all the public keys that are used by the electronic banks will be shared as per the regulation that will be set by the federal government and the private key required to view the transaction will be decrypted by the program that will be developed in collaboration of information security equipment vendors and professional of encryption science. Each transaction should be required to have a digital signature that should hold the identification of the user, location of the teller machine where it was used with the amount of transaction it holds and the date/time stamp. This will be the minimum requirement to be embedded in the smart cards and the teller machine daily reporting system to counter the fraudulent use of the technology and the possibility of Cyberlaundering attempts. The Neural Computing and Artificial Intelligence such as PRISM® Money Laundering Detection (MLD) [22] can be used to form a pattern of similar transactions to one account or many accounts to form a universal group number (UGN) of that smart card which is used on one of the teller machine or a group of teller machine to transfer funds. When doing the same transaction over the internet the IP-Address should be used to locate the place where the electronic banking account creation is taking place. This will be helpful when law enforcement agencies are investigating any case of Cyberlaundering.
What’s being done to prevent Cyberlaundering
Cyberlaundering
To implement any such solution to try to combat Cyberlaundering one of the problems that arises is the regulation of Domain Naming System. It is a known fact the service providers provide hidden address websites facilities to users in return of a very high value packages. An audit must be required to highlight any such discrepancies from the ISP’s. 3.1 Preventive Measures for Cyberlaundering by the Government.
Let us review the improvements in the government agencies by comparing the yearly advancement to address the issue of Cyberlaundering. Although there are many organizations working in partnership with the government I have just mentions few of them here. 3.1.1 Federal Bureau of Investigation
According to the National Money Laundering Strategy 2007 FBI has set nine goals to control the issue of money laundering these goals are as follow. Safeguard the Banking System, Enhance Financial Transparency in Money Services Businesses, Stem the flow of illicit bulk cash out of the United States, Attack Trade-based Money Laundering at home and abroad, Promote Transparency in the ownership of Legal Entities, Examine Anti-Money Laundering Regulatory oversight and enforcement at Casinos, Implement and Enforce Anti-Money Laundering Regulations for the Insurance Industry, Support Global Anti-Money Laundering Capacity Building and Enforcement Efforts and Improve how we measure our Progress. [12] In relation to Cyberlaundering the FBI is determent to cater the issue by supporting cooperation with other countries to achieve a global solution to cybercrimes. At the same time it is enforcing federal laws to control and prevent this issue inside U.S. They have identified banks, depository institution and traditional casino to be actively assisting money laundering. Gaming industry is on an increase in U.S driven by native Indian tribes. FBI Cybercrime investigation department is active against the national and transnational organized criminal enterprises involved in cybercrime.
What’s being done to prevent Cyberlaundering
Cyberlaundering
3.1.2 National Accountability Bureau
National Accountability Bureau of Pakistan launched a project in February 2002 to fight against corruption which is the biggest problem of Pakistan. They have also highlighted the problems that are in the way to achieve a corruption less society [13]. Criminals exploit this weakness of corruption and bribe the officials to avoid or to keep a close eye to act and report on any such information regarding money laundering. Due to the complex stages of the process of money laundering and lack of control over financial institution and government officials it is easy to export and hide the fruits of criminal proceeds. The advance technological infrastructure used by the criminals to further their cause and the lack of such advancement in the law enforcement agencies infrastructure and non availability of any private sector industry to address this phenomena show a huge lack of concern to monitor and control Cyberlaundering. According to Financial action task force on money laundering it is expected that a sum of $70 to 100 billion may be stashed away in foreign banks by Pakistanis in 1996. Moneychangers are unregulated as they are using the alternate banking remittance. The need to achieve the foreign exchange requirements government is dealing with these moneychangers and has turned a blind eye towards them in relation to money laundering. The government has facilitated money laundering and made inward foreign remittances, tax free through financial institutions and without any kind of scrutiny by the auditors. The government is in the process of tightening regulation of money changers and formulating an Anti Money laundering law in collaboration with the FATF, World Bank, State Bank Federal investigation Agency and Asia Pacific Group.
What’s being done to prevent Cyberlaundering
Cyberlaundering
In recent Past it is observed that cyber crime has increased dramatically and to counter their activities it was essential that there must be an organization to monitor, track and apprehend all such criminals. National response centre for cyber crime (NR3C) [14] a Department of Federal Investigation Agency is dealing with all matters related to cyber crimes under the law of Pakistan electronic crime ordinance 2007-2008 [39]. It also provides training to different organization regarding cyber threat that can affect their information resources. 3.1.3 Drug Enforcement Administration
Money laundering is based on criminal proceeds mostly from trafficking of drugs. The mission of the Drug Enforcement Administration (DEA) is to control and prevent the trade of illegal drugs in U.S. and to assist the department of justice to enforce the controlled substances laws. The DEA's primary responsibility is to investigate and prepare a case for prosecution of major violators and drug gangs. DEA helps in the management the national drug intelligence program by cooperation with government and law enforcement officials to collect, analyze, and disseminate strategic and operational drug intelligence information [15]. The traditional way of transporting the money from the buyer to the seller is changing dramatically due to availability of advance technological solution such as e-payment system. But the fact that drugs can only be transported using the same transportation channels and hence therefore DEA’s role is important to control the drug trafficking. 3.1.4 Serious Organised Crime Agency
SOCA deals with suspicious activity reports (SARs) under the money laundering legislation POCA 2002 (Appendix A) that are provided by the financial institutions operating in UK. Its active life was widely critical of the banking and financial services sector and the financial institution for not reporting the suspicious activity reports [16].
What’s being done to prevent Cyberlaundering
Cyberlaundering
SOCA is based in United Kingdom and operates in cooperation of law enforcement and department of justice to prevent money laundering through the banking channel and also coordination with FBI to detect and prosecute cyber criminals to prevent frauds and scams.
What’s being done to prevent Cyberlaundering
Cyberlaundering
3.2 Financial Institution Preventive Measures for Cyberlaundering.
Let us review the improvements in the financial sector and the agencies deal with them to prevent crime. 3.2.1 Financial Crimes Enforcement Network
The U.S. Department of the Treasury established the Financial Crimes Enforcement Network FinCEN in 1990. In 1994 FinCEN operation was broadened to include regulatory responsibilities for administering the Bank Secrecy Act (Appendix A) . The mission of FinCEN is to enhance and safeguard financial systems from criminals. The Strategic Plan of FinCEN for Fiscal Years 2008 -2012 outlines three outcomes that financial systems must be resistant to abuse by money launderers, Detection and deterrence of money laundering and efficient management of BSA information. 3.2.2 Financial Action Task Force
Financial Action Task force was established by G-7 summit in 1989 held at Paris and the main reason for its formation was the increasing concern about the money laundering issue. It has provided a standard policy that constitute forty recommendations to combat money laundering in 2005 the FATF comprises of 31 members and by 2007 this number increased to 170. The main task of FATF is to set standards for anti money laundering, monitor compliance of these standards and studying methods of money laundering. It was detected in 2007 that the new payments system is a growing method to accomplish money laundering. The use of prepaid cards, Internet payment systems, mobile payments, and digital precious metal currency show that the vulnerability of Cyberlaundering exists.
What’s being done to prevent Cyberlaundering
Cyberlaundering
After reviewing the forty recommendations developed by FATF the central idea can be described as that the countries should criminalize money laundering and apply serious penalty to the criminals, that if the crime is intended by the criminal then the charges should be severe (criminal court equivalent) and if the intend is not there then the charges should be less sever (civil court equivalent), countries should adopt procedures to confiscate the criminal proceeds or property, the financial institution should not maintain anonymous account and know their customers by requiring KYC (know your customer) forms as mandatory, to be cautious about the politically exposed persons, to develop policy and procedure to address risk in non face to face business, and monitor transaction that have no apparent lawful and economic purpose. 3.3 Preventive Measures for Cyberlaundering by the Department of Justice.
Let us review the improvements that have taken place to address the Cyberlaundering issue by the Department of justice. 3.3.1 Legislation
The laws that can be used to prevent Cyberlaundering are Computer Misuse Act of 1990 (Appendix A) and EC Directives (Appendix A). As it is a known fact that for Online Banking or to play a game in online casino user is required to have a computer or an electronic device (3G Mobile) to make a transaction to assist the movement of funds (in this case illegal proceeds of crime) from one location to an other. This type of transaction in general goes through a server that is in between the sender and receiver of electronic cash. By using location of the server and the EC Directives that enable the government authorities to monitor sensitive information required to monitor suspicious activities can assist law enforcement authorities in investigation of a Cyberlaundering case.
What’s being done to prevent Cyberlaundering
Cyberlaundering
Although the EC Directives excludes the information society services of gaming, betting and lotteries. The law that can be used to prevent Cyberlaundering through traditional Casinos and financial institutions is Bank Secrecy Act of 1970. This requires the financial institution to keep a record for five years of all the transaction and report any suspicious activity. The UK Payments Association has reported that internet card payments reached £34 billion in 2007. While the spending on charge cards was £133.2 billion [18].The electronic payment system operates with few restrictions and their value is limitless. Online casino lends itself to Cyberlaundering because these is no requirement to provide identity and authenticate parties; there is little or no record keeping or audit trailing; encryption services mean criminals can lock out law enforcement agencies and transactions can be conducted globally, therefore falling outside existing regulatory control [17]. According to KPMG's Fraud Barometer over £1.1 billion of fraud came to UK courts in 2008. This was the second highest level in 21 years. (KPMG, February 2009). The Chairman of the
Cybercrime Working Party of the Fraud Advisory Panel
Cyberlaundering is currently (2006) estimated to be running at $50 billion each year [17]. 3.3.2 The Laws that are related to Cyberlaundering.
After searching articles, books and internet sites the following list of laws that are related to Cyberlaundering in different ways is given these laws are defined in a concise way in the appendix A. [Appendix A]
What’s being done to prevent Cyberlaundering
Cyberlaundering
Federal Reserve Act of 1913, Bank Secrecy Act of 1970, The Solicitors Act 1974, The Privacy Act of 1974, Foreign Corrupt Practices Act 1977, The Right to Financial Privacy Act of 1982, Money Laundering Control Act of 1986, The Electronic Communications Privacy Act of 1986, Anti-Drug Abuse Act of 1988, The Crime Control Act of 1990, The FDIC Improvement Act of 1991, Criminal Justice Act of 1993, The Drug Trafficking Act of 1994, Human rights act 1998, Data protection act 1998, Proceeds of Crime Money Laundering Act of 2000, U.S.A. PATRIOT Act 2001, Sarbanes-Oxley Act 2002, Crime Act 2002, Serious Organised crime and Police Act 2005 etc. 3.3.3 The Money Laundering Offences
There are now five basic money laundering offences that in my view can be used in parallel to Cyberlaundering offenses as well. •
Assisting another to retain the benefit of crime;
The offender can only be charged if it is proved that the intent to assist the criminal was there and the knowledge that the proceeds are directly or indirectly gains of an illegal act is there. The penalty for commission of an offence can range from six months to 14 years and a fine that is not exceeding the statutory maximum or both. This can also be used for Cyberlaundering offences. •
Acquiring, possession and use of criminal proceeds;
The offender can be charged only if reasonable grounds are established that acquisition or possession of criminal proceeds has been acquired at less than full value. The penalty is same as assisting in retaining the benefit of criminal proceeds. With regards to Cyberlaundering technique that I have presented in second chapter the criminal can be using a charged card or making an internet payment system using funds that are criminal proceeds.
What’s being done to prevent Cyberlaundering •
Cyberlaundering
Concealing or transferring proceeds to avoid prosecution or a confiscation order (also called Own Funds money laundering).
Disguising or transferring proceeds of crime for the purpose of avoiding prosecution. Disguising includes removing its nature, source, location, disposition, movement or ownership or any rights with respect to it. The use of encryption to hide the transaction of criminal proceeds can be an offence and the penalty is same as other offence mentioned above. •
Failure to disclose knowledge or suspicion of money laundering;
The professional such as solicitors and banking experts that come to know any such suspicious transaction and do not report it then this will not get them any waiver of professional privilege. The penalty for this offence ranges from six month to five year and fine not exceeding the statutory maximum or both.
What’s being done to prevent Cyberlaundering
•
Cyberlaundering
Tipping off.
If a criminal is tipped off that he is being investigated then the procedure of reporting a suspicious transaction is of no use. The penalty for this offence is the same as failure to disclose offence. 3.4 How Can We Prevent It?
In general all the crime are gain motivated and to have a luxuries life with less efforts. The problem associated with the gain is the identification of the source and to avoid any such problem criminals have to figure out a way to distance them from the crime scene. Hence there is a need to launder the criminal proceeds to reappear in their accounts as legitimate wealth earned from the revenue of there shell company. The most popular source of illicit gains comes from the drugs trafficking and it was the initial catalyst for coordinated international efforts to prevent money laundering. This industry is a highly cash based and to avoid the burden of handling cash it is required to use the financial institutions and in particular online pa yment systems. There are certain Choke points that (FATF) has identified in the money laundering process that is unavoidable by the criminals and is vulnerable to detection. The choke points identified are entry of cash into the financial institution (placement), transfers to and from the financial institution (layering) and cross-border flows of cash (integration). The UK’s system of reporting suspicious transactions through Suspicious Activity Report is an effective policy to deter Money laundering in the traditional financial institution However, cross-border flows of cash is one of the areas mentioned above where the launderer is vulnerable to detection. The police and customs service in UK are empowered by the legislation to seize cash they believe could be the proceeds of drug trafficking.
What’s being done to prevent Cyberlaundering
Cyberlaundering
The record keeping of transaction by financial organizations provides a useful audit trail and gives useful information on people and organizations involved in laundering of funds. Cyberlaundering is still an evolving issue and transfer of electronic cash is an unsolved mystery therefore government of Australia, Canada, UK, EU and U.S have implemented a likewise policy to log and monitor activity of internet users for five years before an internet service provider can use a clearing utility to clear the servers and loss the information that can assist to find the source of an electronic payment sender.
The Strength and Weakness of Different Strategies
Cyberlaundering
Chapter Four: The Strength and Weakness of Different Strategies. The issue of cyber laundering is there since the technology enabled the movement of funds from one location to another without being intercept or intervened. The strength and weakness of different strategies to prevent cyber laundering is discussed as follow. 4.1 Strength of Strategies
The government, financial institution and department of justice have implemented a number of strategies to monitor and control Cyberlaundering. 4.1.1 Financial Reports
There is a possibility to report transaction of amount that is above the value of 10,000. This reporting was required by the financial institution in compliance of Bank Secrecy Act. The software solution is also provided by the government to report any suspicious transaction through different channel of communication. 4.1.2 Follow the Money
As per EC Directives and Bank Secrecy Act financial institution are required to keep a record of transaction for a period of five years. The Telecommunication and Internet service providers are also required to monitor and record the user data for one year to assist the government authorities and law enforcement agencies in investigation pertaining to cyber crime. 4.2 Weakness of Strategies
The limitations that is present while implementing different strategies is discussed below. 4.2.1 Millions of Transactions in a Day.
The Strength and Weakness of Different Strategies
Cyberlaundering
The first and the foremost issue that is residing between a successful combat against Cyberlaundering is the fact that the number of transactions including both financial institutions and electronic payment systems are in millions and processing of each transaction and building up a possible architecture of structured transaction to achieve Cyberlaundering is a very challenging task. 4.2.2 It is hard to identify an Army of Smurf.
The army of unrelated circumstances and identities trying to present a justified transaction when in reality they are assisting some one to hide the source of funds and present their wealth as legitimate 4.2.3 Slow processing due to Jurisdictional Differences
Jurisdiction to jurisdiction information access can be difficult and very time consuming. and a lot of manpower is required to process only a single case. 4.2.4 There are many ways of Exploiting Internet
At present there are many ways of exploiting internet for Cyberlaundering and that is Electronic Cash, Online Casino, Online Auction, Online donation to save tax, Electronic gold, Unregulated electronic payment systems and Online Banking. 4.2.5 Cash Based Business and Services.
Cash based business also accepted prepaid cards and do not require identity as proof for doing business with them. Car dealers, precious stone dealers, professional bankers, accountants and solicitors can provide services and advise to develop a safe strategy to do Cyberlaundering. 4.2.6 Problem of Time and Space.
The Strength and Weakness of Different Strategies
Cyberlaundering
New tool of technology has eliminated the need to have the problem of time and space. The internet time and cyber space when compared to traditional time and space requires reconsiderations of practical implications.
Case Study of Virtual World Second Life
Cyberlaundering
Chapter Five: Case Study of Virtual World Second Life.
Second life (SL) is an online virtual world that is developed in 2003 by Linden Labs founded by Mr. Philip Rosedale in San Francisco. The online virtual world has its own currency called linden Dollars that can be used in the SL virtual world to do business. The founder of linden labs in an interview with the guardian [21] news paper has admitted the fact that money laundering involves real paper bills and that is a problem related to real currencies this statement is contrary to the understanding of intelligence agencies in US [28]. I will be presenting a research that would identify the potential of Cyberlaundering related to the new virtual world and the existing steps that have been taken to control and monitor the money movement. 5.1 Business in Second Life
The SL is using the Network effect business which is an organic and exponential business effect. As on Ninth April 2009 the total number of users logged in last 7 days on SL main website were almost six million [20] and this shows the real popularity of the SL. The total numbers of registered users are 16 million [29]. They use micro-payment system to sell virtual objects like furniture’s, cloth and land in linden dollars from linden exchange (also known as xstreet in SL) or form other residents through charged cards, credit cards, online bank account linked with resident account via lindex exchange to convert real money in to linden dollars. In 2008 it is reported that the inworld economy of SL had virtual goods entrepreneurs, landowners, inworld builders and service providers that achieved a mutual transaction of US $350m.
Case Study of Virtual World Second Life
Cyberlaundering
The terms of service of SL provides protection against the intolerance, harassment, assault, disclosure, indecency and disturbing the peace. The laws that the SL follows are the Global Standards with Local Ratings, in case of violation of term of service first a Warning is given then the account is Suspension and finally Banishment, user will be hold responsible of causing Global Attacks and the activity through alternate resident account will bear responsibility by the principle resident account. Another fact that is holding SL more vulnerable to cyberlaunding is the option that Residents have Intellectual property rights to what they create. As we know that mafia and gangs are always looking for ways to carry out their illegal activity without being noticed or drawing unnecessary attention from the authorities. The server client architecture of SL provided the much needed isolation from the authorities to further the aims of organized crime by gathering in secure location of self owned land to plan, discuss and train an army to commit Cyberlaundering through moving cyber crime proceeds. Hypothetical case example (How Does It Works and Tax Evasion in SL)
Cyberlaunding is all about transferring large sum of money from one location to another without drawing unnecessary attention from the authorities. The reason for this activity can be tax evasion and therefore criminal’s look for a place with minimal risk of being taxed How: Tax evasion is possible as there is no or very less amount of tax applicable in virtual world for example VAT for selling in UK is 15 % in contrast to the 40% higher rate of income tax in the real wealth. In section 5.2.4 (given below) it is shown how Cyberlaundering is achieved by buying land in Russia thus transferring huge amount of cash in linden dollars to Russia and then selling the land to an unconnected party Who: Land mafia can use this channel to buy land in Moscow without paying tax as transaction between residents in linden dollars is not taxable the tax is only deductable when the linden dollars are converted to real currency.
Case Study of Virtual World Second Life
Cyberlaundering
Where: Due to the borderless nature of internet and no legislation in place for the virtual world the tax evasion is possible for the criminals and corporations to hide there gain from the tax man by using this channel of virtual commerce and buying properties in tax free zones such as Dubai and other tax havens. What: The unconnected party described above can be a local Russian thus achieving Cyberlaundering or it can be the same Londoner who buy that land from his Russian counterpart and is finally been gifted the real land back to him and who only needs to pay the gift tax avoiding the stamp duty/land tax, local property taxes and Capital gain tax. 5.2 Problem and Limitation
Financial transaction in Second Life is unregulated as the SL is not a registered financial institution though they are following Federal Reserve Bank like monitory policies. There is no law to monitor and control Cyberlaundering and no need to establish the source of income of any resident. Lets present few problems that are favorable for the launderers. 5.2.1 An Army of Smurf.
The complex stages of Cyberlaundering can be achieved by buying linden dollars by an army of smurf’s (explained in section 2.3.1) and use this currency L$ to buy land and other property from the residents who is using this mode of business to convert illegal wealth into legitimate wealth and transfer of cash from one location to another without interception and reporting. The other party resident can withdraw this L$ by converting it in to their own local currency and charging it to their bank account, credit card, PayPal account and charge card in return of offering a service that need not be their in the virtual world. 5.2.2 Anonymity
Case Study of Virtual World Second Life
Cyberlaundering
There is no need to know your resident and their source of funds. Criminals will exploit this facility of anonymity by selling objects, contents and scripts at any value they like and where access will be given to their army of smurf’s while restricting it for any other resident to avoid the business being reported to the authority. Having intellectual property rights to your created objects, content and scripts will ensure that no one can copy or use your creativity without the consent of the owner and that is a starting point of suspicion for a criminal to know that he is being investigated, reported or observed for suspicion of involvement in Cyberlaundering. Criminals can use the identity of some one else to protect his own identity and there is no need to even prove that you are what you say you are. This facility can be further exploit by opening a bank account in the virtual world as a Singapore bank is operating in second life [30] and providing this fake identity to apply for credit and then silently leave the virtual world with all the real cash transferred in your own charge card. 5.2.3 Open Source
Linden labs will have no way to find out the actual functionality of an application that is created and integrated with the second life viewer application. There is no version control to maintain as the residents can use there developed application with the Second life viewer and can distribute the same to there friends and member of organization to use it for a customized set of operations such as marketing, business meeting, presentations, education and automated electronic payment value transfer in encrypted data format. An online casino application can be developed for securely accepting payment that are encrypted and at the end of the game the remaining cash can be transferred to a charged card of a person to whom this fund was required to be laundered. The details of the users can be used to make such payments even without the consent of the user of such mushroomed online casinos.
Case Study of Virtual World Second Life
Cyberlaundering
An exception that SL holds is that the owner ship of the virtual object such as a castle is not with the company but with the resident and therefore the taxation on the asset which is a bunch of ones and zeros is only theoretically viable and practically the virtual transaction of objects will cripple the virtual world with an unmanageable increase of paperwork and record maintenance. 5.2.4 Tax Evasion
European Union sales tax regulation requires that value added tax must be charged from the resident of EU that uses second life for land purchase and maintenance, for premium memberships and for linden exchange currency buying, selling and processing of credits using PayPal, domestic and international check. Lets assume that you live in London and you require to buy a piece of land in Russia then using the currency of SL that is linden dollars you can easily buy the piece of land at the cost of the land without paying any tax or exchange rate charges using another resident that is a real estate agent offering this service as a personal business. However if you buy the land in traditional way that would require you to first travel to that country then convert your currency to the local currency of that country where the land is located and then a huge sum of taxation would be required to pay before the purchase of the land and finally the cost of the land. So using SL channel of business you can easily avoid the heavy taxation related to the purchase and maintenance of land in Russia. Not to forget the business of real estate in 3D virtual world give a lot more better representation of real property then the news paper clipping or a photograph of a piece of land without any further information relating to buying a piece of land. This business of real estate is a great way to present the land property to the interested inworld residents.
Case Study of Virtual World Second Life
Cyberlaundering
Exchange of linden dollars from one resident to another is not taxable so a resident living in London can hire the services of a professional estate agent living in Russia to buy the land for him using his credentials and then transferring/gifting the ownership of the land to the resident living in London this will help to evade the tax amount that was required to be paid to the government by a foreigner. And the same trend can be followed by the corporation to hide there annual profits to safe the taxation and use it for the new venture of the organization working abroad. Corporation will be choosing this channel of business to buy huge land property from the annual profits of the company and avoid reporting huge annual profits and paying huge amount of tax to the government. 5.2.5 Fast-growing economy is lightly controlled
It is a fact that at present there are more then fifteen million users in second life virtual world. This virtual land has no police and no courts meaning that the users are free to do what ever they like with the slightest fear of being caught. As long as they don’t violate the term of service of SL or encountering any one that would observes there suspicious activity and report it to the authorities. SL has based its policy on creativity and giving residents the freedom to create what they imagine and at the same time make some cash by given services that they can offer like music bands, instrument players and tourism guide for other residents. Controlling the way resident generate money is not a priority but a necessity to provide security to every other resident in SL. 5.2.6 Linden Exchange lacks even basic Regulations
Case Study of Virtual World Second Life
Cyberlaundering
The linden exchange is the only way to convert real currency to buy and sell linden dollars and it even lacks the basic regulation observed by the regular money exchange in the real world. Britain fraud advisory panel recommended to the UK government to extend the traditional financial regulation to the SL virtual world payment solution and online game [40]. The virtual world is a new idea that is being implemented in reality therefore at present there is no legislation to govern the virtual world. The reason that it does not require to be regulated is that there is no legal frame work to regulate the virtual world. 5.3 Solution and Analysis
The SL virtual world used its own currency for the micro payments to buy and sell both real and virtual cloths, jewelry, and furniture’s. The same payment mode is used to rent an Auditorium or to arrange educational classes, group meetings and presentation. The newly immerged so to say future of internet and the limitation to protect the net generation from any possible cyber crime requires that government and intelligence agency extend there counter measure efforts to resolve the problems associated with virtual world. The chairman of the Serious Organised Crime Agency Sir Stephen Lander has said that "Any significant reduction in the capability of law enforcement agencies to acquire and exploit intercept intelligence and evidential communications data would lead to more unsolved cyber crime." [23]
Let us analyze the problem and its solution to the issues stated in section 5.2 above. 5.3.1 An army of smurf
The complex stages of Cyberlaundering can be achieved by buying linden dollars by the army of smurf’s and then using it to buy real land and other luxury items from the residents who is using this mode of business to convert illegal wealth into legitimate wealth and transfer of cash from one location to another without interception and reporting.
Case Study of Virtual World Second Life
Cyberlaundering
Initially the law enforcement agencies used artificial intelligence to form any possible pattern of Cyberlaundering by observing the movement of the linden dollars. Due to the dynamic nature of the virtual world it is not possible to keep a record of every action an avatar performs so there is no reconstruction of pattern and hence artificial intelligence was ban in April 2009 due to the reason that it is a source to drain server resources and a way to boost traffic stats [27]. The difference in virtual world and in real world is that there is possibility that authorities can re-construct an event of Cyberlaundering by joining the dot of evidences that are present in servers of ATM, POS and Electronic Payment Solution systems while in virtual world using client to client architecture there is no way to reconstruct the transaction if it is encrypted. The decryption of this transaction required lengthy process and the number of transaction in any given time is in hundreds if not in thousands. Encrypted transaction is generally treated as suspicious transaction Due to the complexity of controlling the cyber crime the national security agency of America announced that they don’t want to control the cyber security of America [24] alone but with the help of other cyber security agencies. 5.3.2 Anonymity
The feature of anonymity in it self is not a threat but the use of it to do the dirty dealings is a concern to all. For example people would feel more comfortable to get sensitive medical advice in SL [31] to protect their identity for avoiding undesirable attention in their privacy from the social circle. But if same anonymity is used to commit a financial fraud or high yield investment program to deprive other resident from what they own is worse situation then in real world where you can verify the reality of an investment program through numerous sources.
Case Study of Virtual World Second Life
Cyberlaundering
SL keeps a record of information regarding the contents that you have accessed. They do disclose this information to law enforcement agencies if it deems suspicious otherwise this information is kept in a database in an unreadable form to protect the privacy of residents and each access to this database is logged and authorized as per condition or reason to do so [32]. The land in any region is actually located in the servers of SL and if the activity in that region is restricted, recursive, huge virtual traffic and the content is using encrypted functionality or coded messaging or any other suspicious way of dealing is observed through the aggregated information or reported to the SL authorities to look into the matter and demand the clarification from the resident for such an activity by first giving warning then suspension and finally banning them from SL. This region can be filmed to record digital evidence and the objects, contents and scripts can be copied to be analyzed by the digital forensic experts. The intellectual property rights is provided to the residents to protect their legitimate unique business from being copied by other residents but this right is not there for the criminals to ensure that no one can copy or use their creativity without their consent. SL reserves the right to provide the information of the resident to the law enforcement agency if suspicion of criminal activity is established such as Cyberlaundering. The intelligence agencies have drawn much needed attention of US government to the fact of untraceable financial transaction [33] and alternate channel with expanded ability to make a financial transaction. SL establishes the identity of the resident in two parts, the first part is the information provided by the resident and the second part is the activity, accessed content, login IP address, general and specific computer details. If there is a suspicion that the resident is not what they say they are then a proof of identity will be asked to confirm their identity. Hence the anonymity feature is there to have a better experience then what is in the real world and not the visa versa. 5.3.3 Open Source
Case Study of Virtual World Second Life
Cyberlaundering
Linden labs has taken a monitory role in the second life virtual world to control the L$ movement and linden exchange to convert L$ in to real currency. They have several thousand servers at present to support the simulation of avatars using thousands of scripts that are accessed by the residents to create and modify their avatars. The open source functionality has reduced the UDP data traffic load to the SL servers by giving away the independence to the residents to create objects, contents and adding new functionalities to their content/object/script such as translator’s service to give live translation while talking to people of different languages or holding a banner to advertize a product and earn L$ from the company almost same as Google advertisement works. In the summer of 2007, Linden Lab banned online gambling in Second Life virtual world by saying that there are too many issues with online gambling [25]. Although officially it is banned but the potential of using it is still there due to SL client server technology. One can only find the actual functionality of an object and its content by either observing or by using it themselves. To control and monitor this issue FBI and other intelligence agencies have already established their virtual presence in the SL [26]. The laws that are used to criminalize online casino in Second Life was the 1970 Illegal Gambling Business Act (Appendix A) or the Unlawful Internet Gambling Enforcement Act of 2006 (Appendix A). Residents can create an object that can be used to securely transfer charged cards value details and any other form of financial information that are encrypted and this cash value can be transferred to a charged card of a person to whom this fund was required to be laundered. This client to client (hybrid of peer to peer) information transfer can not be monitored and controlled by intelligence agencies or SL servers.
Case Study of Virtual World Second Life
Cyberlaundering
The linden exchange scrutinizes the transaction above 10 USD dollars same as any financial institution but there is no regulatory compulsion to report it to the authorities rather a need to avoid being a party to the crime by helping the crooks. This channel of money movement is still too young to be considered as prone to organized criminal activity and the responsibility of controlling and monitoring illegal and suspicious activity must be shared with the residents to report it if it is observed in there particular region. 5.3.4 Tax Evasion
As discussed in section 5.2.4 the SL uses two ways to establish the identity of a resident if you have mentioned that you live outside of European Union to save the sales tax regulation that requires you to pay VAT for land purchase and maintenance, for premium memberships and also for linden exchange currency buying, selling and processing of credits using PayPal, domestic and international check. SL can establish your location by recording the information of the computer system that you are using to login to second life. The IP address will be use to locate your country and if this information is different from what you have provided then you will receive a warning to change the details of your profile following by suspension and finally banned from SL. Real Estate is a legitimate business and it has an online presence since internet was introduced commercially. The resident that provides the service of real estate agency will bear the responsibility of the contents that they have offered and if an illegal or suspicious activity is observed by the local community in that region or by SL authorities due to the suspicious aggregated information regarding the business and the fortune earned appears to be unrealistic then the information of the resident will be passed to the law enforcement agencies.
Case Study of Virtual World Second Life
Cyberlaundering
The transferring and gifting the ownership of the land to another resident living any where in the world requires that the authority need to make sure the reason of this transaction has some form of sense to it otherwise an investigation need to be performed to establish any tax evasion involved. This is a real phenomenon and needs not be an issue in the virtual world. 5.3.5 Fast-growing economy is lightly controlled
The government of US believes that the future economic growth in virtual world and especially in the SL virtual world is providing a haven in cyber crime activity [34]. With the increasing number of residents the agencies all around the world is also building network in virtual world to effectively communicate, train and manage the cyber crime monitoring and control by using the reporting mechanism of violation of term of contract in SL the criminals are kept away from the SL virtual world. SL virtual world saves the cost of communication in the real world and is an effective way to solve the real world hurdles such as jurisdictional issues and man power to solve a case of Cyberlaundering. 5.3.6 Linden Exchange lacks even basic Regulations
According to currency exchange act [35] a financial institution is required to file an annual financial progress report but SL since 2003 has not produced any annual financial progress report due to the reason that it is not a sole financial institution but an online virtual world simulation host. Similarly due to no monitory policies [36] governing lindenX the revenue in real USD earned by the linden lab from the resident can be used by few higher level individual in the company providing a fertile ground for the criminals to hire the services of the SL company which is already exempted from any liability to damages caused by any reason to avoid reporting the illegal activities of criminal. My recommendation to solve this issue is to extend the financial regulation on to the SL virtual world.
Case Study of Virtual World Second Life
Cyberlaundering
Evaluation
Cyberlaundering
Chapter Six: Evaluation In this chapter we will discuss about the future of Cyberlaundering and the conclusion of this research and after that the recommendation. 6.1 The Future
The future of Cyberlaundering can be defined in relation to banking, cyber payments and e-cash. Let’s take them one by one. 6.1.1 Electronic Payments
The term electronic payment is a common term that is used to represent digital funds transfer of financial value from one user to another. At present the electronic payment system is in use in almost all types of financial transactions that are conducted and operated. The electronic payments systems can be used via the Internet, smart cards and prepaid cards which unlike traditional cards actually contain a microchip, which has record of its value on the card. Some Electronic payments systems use both charged cards and electronic cash.
Evaluation
Cyberlaundering
The designed of the system provides some common elements to the transacting users with immediate, convenient, secure and to some extent anonymous means by which electronic value can be transferred between users. Due to the borderless nature of this system there is a potential for criminals to exploit and facilitate the international movement of illegal funds. The time and space concept in the internet, which makes the electronic payment systems efficient and anonymous, are positive cha racteristics from the launderer's perspective and with added feature of security by using encrypted peer to peer model that makes it attractive to them. And the fact the traditional concept of time and space characteristics may actually impede law enforcement from leading in the online world and to detect suspicious activity. A specific concern is a natural response to be the impact of Electronic payments on the efficient current regulatory/policy initiatives against financial crime and the consecutive impact on traditional investigative techniques and analysis. Another issue that needs to be considered is the differences in international jurisdictions and the political will to criminalize Cyberlaundering. According to FATF addressing the potential of money laundering threats is one of the challenges for the future that is posed by the electronic payment systems. 6.1.2 E-Cash
There are a number of systems of Electronic Cash such as Freedom Eagle Cash Card which is a rechargeable card and has a self contained store of value and can be used on the electronic payment systems. Further to this are online banks that use the Internet’s telecommunications capability to transfer electronic funds between users. The personal computer can be terms as self contained store of value and an access device as it serves as the user’s interface with the Internet payment system.
Evaluation
Cyberlaundering
Peter Lilly [3] describes the Internet as being one of the greatest opportunities for Cyberlaundering because of the anonymity features and a convenient medium to aid there aims and the use of encryption software to securely make transactions over World Wide Web. With the very nature of Internet, being border less and networked the movement of capital to from highly monitored system to relatively unregulated jurisdiction will take place. It remains to be seen whether launder take advantage of electronic payment system to avoid any regulations/policy on other traditional laundering techniques. It is however, a challenge to the authorities. With Freedom Eagle Cash Card, the way it works is that the card does not require any ID. The limit on the cards is unimaginable as it can be recharged again and again. This value will be set by issuing banks with unlimited spending power. This system is already in operation in London, UK. This Prepaid card is tailor made for Cyberlaundering unless some safeguards are put in place. 6.2 Conclusion
Cyberlaundering is a sub branch of Money Laundering which is as old as the creation of money. Money laundering is an integral part of every crime and the lifeblood of almost all the criminal activity such as drug dealings, scams, smuggling, arms trade, terror activity, extortion and tax saving. It is also the world’s largest business with huge gains. Criminals throughout history need to find a way to hide the source of newly acquired wealth to protect them from prosecution for their crime. The scale of the problem of Cyberlaundering has escalated out of all proportion and this is due to the advance technological solution that helps the cause of the criminal by providing safe havens and channels to further their aims.
Evaluation
Cyberlaundering
It is an ongoing problem faced by the international economy, and while researching this work, it is evident that the fundamentals of Money laundering remains largely the same, technology has offered means to convert illegitimate wealth into legal assets. The largely unregulated growth of the Internet payment system presents that the criminals could have money transfer without any audit trail. Authorities need to make sure that laws are made before the technology is introduced to prevent abuse of any new techniques that professional money launderers can use to transfer ill-gotten proceeds. A growing realization of the fact is that the cyber crime is increasing to an extent that Cyberlaundering and its relationship with organized crime are interlinked. The huge profits that are sum up to these criminals from cyber crime will be used not only to facilitate but to consolidate the assets of those in control of this business. The organized crime can be characterized as follows that are evident in Cyberlaundering: •
group activity that is carried out by more than one person;
•
long term criminal activity which is continuing;
•
criminal activity which is border less;
•
generally on a large scale; and
•
The gains are use in dirty businesses.
These characteristics dictate how serious kind of criminal activity is developed, and that how sophisticated and complex they are. The way of organizational working of money laundering in its nature, its scale and capacity to exploit the legitimate business world both locally and internationally. These characteristics have led to combine international action for a solution to combat Money Laundering. The result was the formation of the FATF and international agreements and legislation. In fact, the publication of the FATF forty recommendations in 1996 - recently updated in 2003 was a watershed in the fight against money laundering.
Evaluation
Cyberlaundering
A general observation, given the borderless nature of Cyberlaundering, is that geographic borders have become increasingly irrelevant. Launderers generally move their proceeds to jurisdictions where anti-money laundering countermeasures are very weak or nonexistent. Electronic movement of money to these locations is particular concern for the authorities due to their un-intercepted and instantaneous nature. The number of electronic payment instructions that does not include the relevant details of both senders and beneficiaries due to the fact that they are not primarily financial institutions. Reasons to fight Cyberlaundering are increasing, as this ac tivity poses a significant threat. The four major objectives identified by FATF to combat money laundering activity are firstly, that the standard needs to be revised, clarify to have effective measures to prevent easy laundering. Secondly, the implementation of these standards needs to be on a global level to prevent criminal organizations to finance further illicit activities. Thirdly, the ready use of the financial system by launderers risks the entire economical system therefore it needs to be identified and responded accordingly. Finally, FATF needs to engage with stakeholders and partners all over the world as the accumulation of wealth can pose a serious threat to national and democratic system. Cyberlaundering represents a potential threat to economic and financial development and consecutively to the political integrity and stability of a nation. Developing nations crave investment in their nations and therefore a particular area of concern as they are more willing to accept suspicious transactions. As a result, the guidelines, standards and legislation for preventing the laundering process is more then needed now then ever.
Evaluation
Cyberlaundering
Accumulation of money is the motivating factor in cases of almost all crime. For enforcement of legislation to be effective, we must address the multibillion-dollar criminal enterprises. Financial institutions are the primary grounds use for money laundering and therefore they can be defined as the forefront of the battle against launderers. (As illustrated by FATF 40 Recommendations (points 5-16)). However, an emerging criminal class has been uncovered as members of - professional launderers after investigations. They are expert in accountancy, soliciting, money broker and members of other professions. For them Cyberlaundering is an easy route to fulfill there greed to have maximum wealth. This has attracted attention from the concern authorities and therefore legislation such as The Solicitors Act 1974 (Appendix A) has been put in place to ensure there is no immunity for the financial institution or professional advisor for providing any help or ease to counter Cyberlaunding. Laws related to Cyberlaundering are concerned primarily to prevent the criminal access to the existing financial system. Enforcement is concerned with distancing the criminal from the proceeds of crime. To effectively achieve the both: increased emphasis is required to identifying the proceeds of crime and keeping the criminals away from using the financial system as there primary ground to further there cause. If this is achieved successfully then the business of Cyberlaunding will become a risky activity and ultimately projects as a risk not worth it. 6.3 Recommendations
Based on the research work that I have conducted I now wish to make the following recommendations;
Evaluation
Cyberlaundering
A combined action to enforce a preventive measure is required in partnership with financial centre, law enforcement agencies and government of the nations. A real solution available at present is that all countries should approve the U. N. Convention against Corruption in 2003 [41] and to implement effective anti-money laundering laws in their country. Above all, we must develop awareness and training programmers for employees of the forefront institutions and general public to identify the points where this crime is most vulnerable and identify what can be done to separate criminals from their criminal proceeds. In different jurisdictions launderers maintains a list generally termed as "shopping list" which is used to size up available area wise opportunities to further their aims. If the list of weakness in the system in any specific area can be develop will help implement specific measures for countries to adopt to fight laundering. The political will is required to combat Cyberlaundering and the measures are a natural progression for countries against this insidious crime. We need to have a secure and permanent channel for global information exchange and mechanisms for reporting suspicious transactions The Holy Quran refers to the disharmony of the people of the world in chapter eleven verse hundred nineteen that if they create factions and divisions amongst themselves they would lead a life of chaos and gives the solution to achieve peaceful life is to develop universal brotherhood by following the divine revelation. From this reference we know that we have to build a compliance culture among local and global financial institutions; and to make sure that a proper systems and procedures is put in place to achieve universal effectiveness. The leaders in financial institution must encourage applying bank licensing procedures strictly, the channel of information exchange must be secure and permanent, and training practitioners must be an integral part of employment. The general public must be given awareness regarding the dire consequences of Cyberlaundering;
Evaluation
Cyberlaundering
Non-financial institution, law enforcement agencies and government of all the nations should coordinate locally and globally to increase and improve the limited intelligence sharing. Another factor that needs to increase is the limited human resources which are involved in the labor intensive work that required substantial amount of time to investigating suspected violations. FATF’s forty recommendation should be implemented as a consistent set of policies on a global level. The new and advance technologies such as electronic payment systems and online casino require global attention in terms of monitoring and legislation. An increase countermeasure is the need of the present time to combat the use for Cyberlaundering. The internet policing is required both locally and globally to prevent Cyberlaundering and to share information of suspicious activity with relevant law enforcement agencies. The choke point to prevent Cyberlaundering is that the authorities can monitor the movement of funds and hence measures should be introduced to address this issue. It is presumed that after successful implementation of the recommendations above, the authorities can build a net to trap the launderers and distance them from the ill gotten electronic cash that will cause wreckage to further their aims and reducing their channel of illegal business. However, the developed countries are required to influence the under developed countries to have a political will to combat against Cyberlaundering by providing training and awareness to stakeholders and professionals to achieve strong coordinated overall international action.
Appendix
Cyberlaundering
Appendix A (Definition of concern Laws) Federal Reserve Act of 1913,
The act of Congress that created the Federal Reserve System, the central banking system of the United States of America, which was signed into law by President Woodrow Wilson. Bank Secrecy Act of 1970,
Requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of $3,000 or more (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities The Solicitors Act 1974,
Section 34 of the Solicitors Act 1974 requires solicitors to provide an annual report signed by an accountant, one of the main purposes of which is to alert the Law Society to the possibility of improprieties in the conduct of a solicitor’s practice. If the report fails to detect the possibility of fraud, the Law Society may seek to recover damages from the reporting accountants for compensation paid to the victims of the fraud. The Privacy Act of 1974,
No agency shall disclose any record which is contained in a system of records by any means of communication to any person, or to another agency, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains Foreign Corrupt Practices Act 1977,
Appendix
Cyberlaundering
It is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials. The Right to Financial Privacy Act of 1982,
The RFPA is a United States Act that gives the customers of financial institutions the right to some level of privacy from government searches. Before the Act was passed, the United States government did not have to tell customers that they were accessing their records, and customers did not have the right to prevent such actions. It came about after the United States Supreme Court, in United States v. Miller, 425 U.S. 435(1976), held that financial records are the property of the financial institution with which they are held, rather than the property of the customer. Money Laundering Control Act of 1986,
It is a United States Act of Congress that made money laundering a Federal crime. It was passed in 1984. It consists of two sections, 18 U.S.C. § 1956 and 18 U.S.C. § 1957. It enhanced the Bank Secrecy Act by making it a crime to structure transactions in such a way as to avoid the reporting requirements of that Act. The Electronic Communications Privacy Act of 1986,
It was enacted by the United States Congress to extend government restrictions on wire taps from telephone calls to include transmissions of electronic data by computer Anti-Drug Abuse Act of 1988,
The Act requires employers who contract with or receive grants from federal agencies to certify that they will meet certain requirements for providing a "drug-free workplace." Illegal Gambling Business Act of 1970
Appendix
Cyberlaundering
The Illegal Gambling Business Act of 1970 was enacted as part of the Organized Crime Control Act. The statute (18 U.S.C. §1955) was aimed at syndicated gambling, that is, large-scale, illegal gambling operations that were thought to be financing organized crime. Computer Misuse Act of 1990.
An Act of the UK Parliament, introduced partly in response the decision in R v Gold & Schifreen (1988) 1 AC 1063. Critics of the bill complained that it was introduced hastily and was poorly thought out. Intention, they said, was often difficult to prove, and that the bill inadequately differentiated "joyriding" crackers like Gold and Schifreen from serious computer criminals. The Act has nonetheless become a model from which several other countries, including Canada and the Republic of Ireland, have drawn inspiration when subsequently drafting their own information security laws. The Crime Control Act of 1990,
The Act bans the manufacture and import of certain semi-automatic assault weapons The FDIC Improvement Act of 1991
It allowed the FDIC to borrow directly from the Treasury department and mandated that the FDIC resolve failed banks using the least-costly method available. It also ordered the FDIC to assess insurance premiums according to risk and created new capital requirements Criminal Justice Act of 1993,
(With its many variations) is a stock short title used for legislation in the United Kingdom, the Republic of Ireland and Canada relating to the criminal law (including both substantive and procedural aspects of that law). It tends to be used for Acts that do not have a single cohesive subject matter. The Drug Trafficking Act of 1994,
Appendix
Cyberlaundering
Where the defendant is convicted of a drug trafficking offence and the prosecutor applies to the Crown Court for a confiscation order the court must determine whether the defendant has benefited from drug trafficking. Human rights act 1998,
The Act makes available in UK courts a remedy for breach of a Convention right, without the need to go to the European Court of Human Rights in Strasbourg. It also totally abolished the death penalty in UK law Data protection act 1998,
It is a United Kingdom Act of Parliament which defines a legal basis for handling in the United Kingdom (UK) of information relating to people living within. It is the main piece of legislation that governs the protection of personal data in the UK. Although the Act does not mention privacy, in practice it provides a way in which individuals can enforce the control of information about themselves Proceeds of Crime Money Laundering Act of 2000,
These Regulations implement, in part, Directive 2005/60/EC of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (“the Directive”) U.S.A. PATRIOT Act 2001,
The Act increases the ability of law enforcement agencies to search telephone, e-mail communications, medical, financial, and other records; eases restrictions on foreign intelligence gathering within the United States; expands the Secretary of the Treasury’s authority to regulate financial transactions, particularly those involving foreign individuals and entities; and enhances the discretion of law enforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts.
Appendix
Cyberlaundering
The act also expands the definition of terrorism to include domestic terrorism, thus enlarging the number of activities to which the USA PATRIOT Act’s expanded law enforcement powers can be applied Sarbanes-Oxley Act 2002,
The legislation establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms. It does not apply to privately held companies. The Act contains 11 titles, or sections, ranging from additional Corporate Board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law Proceeds of Crime Act (POCA) 2002,
It is an Act of the Parliament of the United Kingdom which provides for civil recovery of the proceeds from crime and created the Assets Recovery Agency. Serious Organised Crime and Police Act 2005.
It is an Act of the Parliament of the United Kingdom aimed primarily at creating the Serious Organised Crime Agency, it also significantly extended and simplified the powers of arrest of a constable and introduced unprecedented restrictions on expressing political dissent in public Internet Gambling Prohibition Act of 2006.
The Internet Gambling Prohibition Act (IGPA) was a 1999 bill in the US Senate to ban Internet gambling. Passage of the bill was defeated, in large part, by the lobbying efforts of Jack Abramoff. The bill was supported by Christian conservative g roups such as Focus on the Family, Moral Majority, and the Christian Coalition. A new version of this legislation was attached to the Safe Port Act and became law in 2006. Directive 2006/24/EC.
Appendix
Cyberlaundering
Directive is a legislative act of the European Union which requires member states to achieve a particular result without dictating the means of achieving that result. Directive 2006/24/EC also know as data retention directive of the European Parliament and of the Council of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC" is a Directive issued by the European Union and relates to Telecommunications data retention.
Appendix
Cyberlaundering
Unlawful Internet Gambling Enforcement Act (SAFE Port Act of 2006).
The Security and Accountability for Every Port Act of 2006 was an Act of Congress in the United States covering port security and to which an online gambling measure was added at the last moment. The House and Senate passed the conference report on September 30, 2006, and President Bush signed the Act into law on October 13, 2006.
Reference and Bibliography
Cyberlaundering
Reference and Bibliography [1] James R. Richards (1999) Transnational Criminal Organizations, Cybercrime, and Money Laundering, CRC PRESS [2] Androniki n. Tzivanaki, University of Leicester Information society services in south-eastern Europe as a means for mone y laundering. Athens January 2001 [3] Dirty dealing the untold truth about global money laundering, international crime and terrorism By Peter Lilly 2006 [4] The Washing Machine: How Money Laundering and Terrorist Financing Soils Us By Nick Kochan 2006 [5] http://osaka.law.miami.edu/~froomkin/seminar/papers/bortner.htm [6] http://www.fincen.gov/international/files/fiuinaction.pdf [7] http://www.barbadosfiu.gov.bb/guidelines.aspas on [27 Feb 2009]) [8] http://www.antimoneylaundering.ukf.net/papers/solicitor.htm#risk as on [28 Feb 2009]) [9] Steven Philippsohn, Money Laundering on the Internet, Computers & Security, Volume 20, Issue 6, 1 September 2001, Pages 485-490, ISSN 0167-4048, DOI: 10.1016/S0167-4048(01)00606-X. (http://www.sciencedirect.com/science/article/B6V8G-44416WY6/2/c6c2ea35a4f1db4dffd547a9b36fe5ad )
Reference and Bibliography
Cyberlaundering
[10] Money Laundering in Cyberspace The World Bank Financial Sector Working Paper November 15, 2004 Tom Kellermann, CISM [11] http://www.softduit.com/mavenmappersinformation/2001/06/01/cyberlaundering-lowtech-meets-high-tech/ [12] 2007 National Money Laundering Strategy http://www.treas.gov/press/releases/docs/nmls.pdf [13] www.nab.gov.pk [14] www.nr3c.gov.pk [15] http://www.usdoj.gov/dea/agency/mission.htm [16] www.soca.gov.uk [17] Stephen Saxby, News and comment on recent developments from around the world, Computer Law & Security Report, Volume 19, Issue 4, July 2003, Pages 328-347, ISSN 0267-3649, DOI: 10.1016/S0267-3649(03)00412-6. (http://www.sciencedirect.com/science/article/B6VB3-491Y5V0D/2/4cfa096a9b12268a5862b9208dc47eeb) [18] http://www.apacs.org.uk/resources_publications/card_facts_and_figures.html [19] Cyberpayments and Money Laundering: Problems and Promise. Roger C. Molander, David Mussington, Peter Wilson; RAND 1998 [20] https://secure-web2.secondlife.com/statistics/economy-data.php?d=2009-04-12 [21]
Reference and Bibliography
Cyberlaundering
http://www.guardian.co.uk/technology/2007/may/17/media.newmedia2 [22] http://www.redplc.com/red210.asp [23] http://www.telegraph.co.uk/news/uknews/5215413/Every-phone-call-email-or-websitevisit-to-be-monitored.html [24] http://www.securityfocus.com/brief/951 [25] http://www.priv.gc.ca/information/pub/sl_080411_e.cfm#sec233 [26] http://www.newscientist.com/article/dn11533-fbi-investigates-virtual-casinos-in-secondlife.html [27] http://www.secondlifeupdate.com/news-and-stuff/linden-lab-bans-second-life-camping bots-traffic-bot-alt-avatars/ [28] http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article1613283.ece [29] http://communities-dominate.blogs.com/brands/2009/02/second-life-at-16-million-userssays-cnn-today.html [30] http://www.zdnetasia.com/news/internet/0,39044246,62015826,00.htm [31] http://www.ndu.edu/IRMC/CDC_SecondLife.pdf [32] http://secondlife.com/corporate/privacy.php [33] http://www.salon.com/opinion/feature/2008/02/25/avatars/ [34] http://www.virtualworldsnews.com/2008/05/homeland-securi.html#more http://www.nextgov.com/nextgov/ng_20080514_8611.php?oref=search
