Legal loopholes are exposing web-based virtual communities to a growing risk of theft and deception according to watchdog the Fraud Advisory Panel.
“Such communities are not just chat rooms, they are also lucrative and growing marketplaces,” said the chairman of the panel’s Cybercrime Working Group, Steven Philippsohn. “Members use these interactive sites to buy and sell tangible goods and services such as land and property, clothing, music and bookmaking. But there’s nothing virtual about online crime, it’s all too real. It is time government took this seriously."
Virtual communities
Online virtual communities are a combination of internet chat room, 3D games and next generation internet environment in which residents can choose what they look like and what they do, with goods and services traded using virtual money. South Korean police reported in 2003 that more than half of alleged cybercrime occurred on ‘virtual world’ gaming websites. The panel argues that the UK government must ensure that funds exchanged in this way count as genuine financial instruments covered by existing laws and regulations. “That’s the key to successful crime prevention in this evolving area,” said Mr Philippsohn.
Several problems
The Fraud Advisory Panel highlights several problems arising with virtual communities:
Credit card fraud against genuine customers and suppliers
Hacking into databases and identity theft
New opportunities for money laundering via false online identities
Tax evasion and unregulated cross-border money movements
Sales of age-restricted goods and services to minors.
Virtual communities can also be used by organised gangs intent on avoiding surveillance.
Mr Philippsohn added: “The legitimate benefits of virtual communities will prove enormous but people need to be aware that this cutting edge technology has a darker side.”
The Working Group’s findings are based on a report to them by TRMG (www.trmg.org) chairman Mark Johnson.
About the Fraud Advisory Panel
It is a registered charity, established in 1998 by the Institute of Chartered Accountants in England and Wales (ICAEW) which continues to provide support. The panel has sought to raise the profile of fraud, develope proposals for the reform of policing, prosecution and the law; worked to improve business and professional education and training; and it has commissioned research, for instance on the extent of fraud, cybercrime and the risk to SMEs. Members include representatives from the legal and accountancy professions, industry associations, financial institutions, government agencies, law enforcement, regulatory authorities and academia.
