Money laundering in Second Life: get real
Filed under: Economy, Opinion, Second Life, Legal
According to several of my real life friends who have jobs in the financial sector, Second Life has a reputation in the UK-financial and computer professional industries as a haven for money laundering. About 10 seconds worth of research suggests this is total bunk.The official line is that amounts of about £25,000 (roughly US$50,000) constitute the bottom end for money laundering. This is easy to lose in the US$1.5 million that changes hands in Second Life daily (see Counting the coppers for daily information). This is true. It also ignores one rather critical element.
Let's pretend I'm a money launderer, or I need to launder some money. I have "dirty" money - perhaps I'm a thief, or I run an illegal gambling den. I want to take my money, pass it though some system and get as much "clean" money back as possible within a reasonable period of time. Therein lies the rub. You see, the Second Life LindeX exchange is also pretty stable, at about US$250,000 per day. If I push US$50,000 through that, what on earth would happen to the market?
Well, first up, I can't just buy US$50,000 straight off. In fact, without demonstrating a need and a pattern of behaviour that requires it, and providing extra information asking for an upgrade I can't trade more than US$5,000 per month - although over time I can increase that to quite sizable amounts - up to US$30,000 per day if I'm registered as an enterprise (source: LindeX Billing Limits). So, if I'm willing to take my chances with registering, I can just about get a high enough trading limit to launder my money every other day. So far I'm underwhelmed.
Second, LindeX just doesn't trade enough. If I try to pull US$50,000 out, or pump it in, the exchange rate would go all over the place, and so would the daily trading figures. I might believe I you could pull out US$5,000 a day for a few days without it massively changing the trading market, but I think you would be pushing your luck with that much. Let's say you can do US$2,000 a day. That means it takes basically a month to launder your smallest interesting amount of money, after registering for it. Is it really worth it?
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Reader Comments (Page 1 of 1)
Tateru Nino said on 4:15PM 2-25-2008
Also, you have to run the money through a credit card or paypal first, which more or less scotches the whole deal.
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AceCassidy said on 4:23PM 2-25-2008
The other question that needs to be asked is how is someone going to get their "dirty" money into Second Life so that it can be scrubbed and removed via Lindex?
Its not like there is any place where I can take wads of $100 bills that may have been accumulated surreptitiously, and easily convert them into $L.
It sounds to me like the UK financial and IT industries have over-active imaginations.
- Ace
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Jones said on 5:34PM 2-25-2008
Not according to a friend of mine who worked there for a while. The reason you see a lot of these limits and checks now was because at least up till last summer they were getting dinged up near 6 figures every month. They also had to change billing providers within a matter of days as their older one dropped them for too much fraud (remember all the billing issues that cropped up when they cut back on the information they took etc, all because they had to change companies on the fly, only a year after they had switched to them).
It's a big issue facing the entire industry. Believe there is an article out there where SOE's Smedley was saying they were losing $1 million every 6 months. Wow got cut off from the one bank and they only take subscriptions let alone all the transactions SL does.
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Frans Charming said on 12:57AM 2-26-2008
You take a group of people who can use some extra money. Use their bank accounts to deposit a sum of money. You transfer 99% to LL. The 1% is for them providing you the bank account.
In SL that L$ gets transfered to your 'Business' avatar that some 'widget shop'. You sell it on the lindex, transfer to your bank account and count it as sales in real life business.
This scheme can and is used without SL as well, of course. SL is just the kind of new and unknown system to confuse and hide from the man.
Of course this will means you loose a lot of money in fees and tax, but you don't have to launder all your dirty money, just enough to make a living in the tax man's eyes. So they don't ask you how you pay the rent.
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Richard Bartle said on 2:57AM 2-26-2008
>Second Life has a reputation in the UK-financial and computer professional industries as a haven for money laundering.
Not among the people actually concerned with regulating it, it hasn't. I spoke with the Financial Services Authority last year, and it concluded (correctly) that there wasn't anywhere near enough money going into and out of Second Life for them to worry about money laundering. Professionals that they are, they do monitor the situation, but they certainly don't regard SL as a "haven for money laundering".
Online casinos, on the other hand...
Richard
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