Virtual worlds and money laundering under EU law: The inadequacy of the existing legal framework and the challenges of regulation

DOI10.1177/2032284419841711
AuthorAndreas Karapatakis
Publication Date01 Jun 2019
SubjectArticles
Article
Virtual worlds and money
laundering under EU law:
The inadequacy of the existing
legal framework and the
challenges of regulation
Andreas Karapatakis
Queen Mary University of London, UK
Abstract
The technological advancements and the rise of online gaming have given birth to a ‘new’ crime,
that is, the crime of money laundering through virtual worlds with the use of gaming currency.
However, the current European anti-money laundering (AML) regime is incapable of addressing it.
The unique environment from virtual worlds renders the traditional notions and definitions about
money laundering obsolete and requires from the European Union legislator to take steps towards
a more technologized idea of money in order to fight this crime. Nevertheless, the effort for a
more contemporary approach of money laundering, and the insertion of gaming currency, in the
AML regime is inextricably linked to the comprehension of the present threat from virtual worlds.
Keywords
Criminal law, virtual worlds, virtual currencies, online gaming, money laundering, EU anti-money
laundering regime, cyberlaundering, Fourth AML Directive, World of Warcraft, Second Life
Introduction
Money laundering is a relatively old crime.
1
The first impetus for international action to combat it
occurred from concerns related to drug trafficking which resulted in the 1988 United Nations
Corresponding author:
Andreas Karapatakis, Trainee Lawyer of the Athens Bar Association, LLM (Distinction) on Criminal Justice, Queen Mary
University of London, UK.
E-mail: andkarapatakis@gmail.com
1. M. J. Daley, ‘Effectiveness of United States and International Efforts to Combat International Money Laundering’, St.
Louis-Warsaw Transatlantic Law Journal 2000 (2000), p. 175.
New Journal of European Criminal Law
2019, Vol. 10(2) 128–150
ªThe Author(s) 2019
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DOI: 10.1177/2032284419841711
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Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Con-
vention).
2
In the 1980s, the crime of laundering had a marginal role. However, the European Union
(EU) addressed this crime in 1991 with the First anti-money laundering (AML) Directive,
3
fol-
lowed by three others consecutively. The rationale behind this legislative action was the fact that
criminals obtain property from their unlawful activities; the AML regime attempted, thus, to find a
legal way of making this a difficult process.
The evolution of the AML framework is symbolized by the constant enlargement of the list
of crimes that generate the illegal proceeds and the appointment of the private sector as a
guard to prevent money laundering.
4
Despite its positive features, the Internet also served as a
new harbour for criminals who found this fortress of anonymity extremely attractive.
5
Gra-
dually, traditional crimes have been transformed into cybercrimes, resulting in the creation of
a field where conventional notions and definitions seen to be outdated.
6
This new environ-
ment has also ‘influenced’ the crime of money laundering, rendering it a tremendously
challenging crime to fight.
7
For instance, the exploitation of new technologies caught the
attention of the Financial Action Task Force (FATF), who made an explicit reference to this
threat in its recommendations.
8
This study will focus on the phenomenon commonly known as ‘Virtual Worlds’, which
developed along with cyberspace in the 1990s.
9
Online games are joyful and innovative.
10
A
unique feature of the virtual world is the internal economy that exists in its borders.
11
Con-
sequently, the element of real-world money, added to the entertainment, results in the pos-
sibility for the users to make a profit through the game’s market. However, the line between
right and wrong is blur in this environment, which gives the illusion that anyone has the right
to do whatever they want with minimum punishment.
12
In the particular case of money
laundering and terrorist financing through virtual worlds, the crimin als abuse the blindness
of this environment, that is, the anonymity.
13
Therefore, if there is a place where money can
2. The United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) (here-
inafter Vienna Convention).
3. Council Directive 91/308/ECC of 10 June 1991 on prevention of the use of the financial system for the purpose of
money laundering, [1991] OJ L166/77 (hereinafter First AML Directive).
4. V. Mitsilegas and N. Vavoula, ‘The Evolving EU Anti-Money Laundering Regime: Challenges for Fundamental
Rights and Rule of Law’, Maastricht Journal of European and Comparative Law 23(2) (2016), p. 261, 270–274.
5. I. Walden, Computer Crimes and Digital Investigations, 2nd ed. (Oxford: Oxford University Press, 2016), pp. 11–12.
6. S. W. Brenner, Cybercrime and the Law: Challenges, Issues and Outcomes (Boston, MA: Northeastern University
Press, 2012), p. 5.
7. A. S. M. Irwin and J. Slay, ‘Detecting Money Laundering and Terrorism Financing Activity in Second Life and World
of Warcraft’ (International Cyber Resilience conference, Perth Western Australia, August 2010), p. 41. Available at:
http://ro.ecu.edu.au/icr/5/ (accessed 10 July 2017).
8. International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation-The FATF
Recommendations (February 2012), at 15 (hereinafter FATF Recommendations).
9. O. S. Kerr, ‘Criminal Law in Virtual Worlds’, The University of Chicago Legal Forum (2008), 415.
10. A. S. Lipson and R. D. Brain, Computer and Video Game Law: cases, statutes, forms, problems & materials (Durham,
NC: Carolina Academic Press, 2009), p. 505.
11. K. Cornelius, ‘Responsibility under Criminal Law in Virtual Worlds’, in K. Cornelius and D. Hermann (eds.), Virtual
Worlds and Criminality (Berlin, Germany: Springer, 2011), p. 101.
12. C. Klimmt, ‘Virtual Worlds as a Regulatory Challenge: A User Perspective’, in K. Cornelius and D. Hermann (eds.),
Virtual Worlds and Criminality (Berlin, Germany: Springer, 2011), p. 14.
13. Council of the European Union, ‘Revised Strategy on Terrorist Financing’ 11778/1/08 REV 1, at 6.
Karapatakis 129

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