[>Htech] Game on: criminals set sights on virtual realities

oxyryxo oxyryxo at yahoo.com
Sun Dec 31 05:01:13 PST 2006

Report to warn that the explosive growth of computer-generated worlds
could lead to money laundering
By Stephen Foley in New York
Published: 31 December 2006

Virtual worlds that have become a second home to millions of computer
users could come under the scrutiny of governments as fears grow that
they are being used by criminals to launder money.

A report due out next month from Deloitte, the consultancy firm, will
say the nascent economies that have developed inside internet-based
games such as Second Life and Entropia Universe could be exploited by
criminal gangs.

The report warns that the fast-growing popularity of these games could
tempt organised criminals, as players can trade virtual property and
convert profits back into real currency.

Virtual realities have grown in sophistication since role-playing
computer games migrated to the web and allowed players to interact
with potentially unlimited numbers of people across the world.

While games like World of Warcraft have concentrated on fantasy
challenges, Second Life and Entropia have created worlds much like our
own, where virtual property magnates, clothes designers and
prostitutes offering virtual sex make hundreds of thousands of real US
dollars a year.

In Entropia, the virtual currency, called the PED, is pegged to the US
dollar. Players can convert real money into PEDs and back again using
an online payment system.

Last year, one American entrepreneur paid $100,000 (#51,000) for a
virtual space in Entropia that he planned to convert into a nightclub.

The real-world value of transactions in virtual realities is rising
steadily, and is likely to continue growing through 2007. One estimate
places the value of commerce in Second Life at $265,000 a day, and it
is estimated that average turnover is rising by up to 15 per cent a
month. If these trends continue, Second Life's overall GDP could be
close to $700m in 2007.

The explosive growth has already attracted the attention of law makers
in the US, who are worried about the tax implications of transactions
going on inside the virtual world, away from the oversight of the
Internal Revenue Service. A joint committee in Congress is finalising
a report on the real-world implications of virtual economies, although
its chairman has insisted the aim is to head off taxation of virtual

Deloitte's report will argue that governments should look first at the
potential for crime. "Governments may wish to focus more on
identifying any attempts to exploit the mechanisms of virtual
economies to undertake criminal activity," Deloitte will warn. "Money
launderers may use trade in digital artefacts or the ability to
withdraw cash from an ATM as a means of money laundering."

A spokesman for Second Life's owner, Linden Labs, said the company was
happy to co-operate with tax authorities and criminal investigators,
but could not police such matters itself. "The nature of having built
a highly participatory economy makes it very difficult, and Linden
Labs has always tried to take a hands-off approach to regulation and
in-world policing."

Deloitte cautions that the economic influence of virtual worlds is
still tiny in comparison with global GDP of $47 trillion. And the
long-term sustainability of individual operations is in question.
Second Life, for instance, has been plagued in recent months by
technical glitches and has attracted the attention of malicious
computer hackers.

Separately, the Deloitte report will examine how corporations might
make money from social networking sites. It will argue that instead of
following MySpace and YouTube in targeting young users, new sites
should reach out to older internet users and extended families or
tight-knit groups, and begin charging for "privacy" - services that
control the people who can access shared material.


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