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Uk gov't urged to act on 'virtual goods'

Anti-fraud laws should apply to Second Life

The UK government must ensure that funds exchanged in online communities or ‘virtual worlds’ are protected by existing anti-fraud laws and regulations, an independent watchdog has warned.

The Fraud Advisory Panel, a registered charity set up by the Institute of Chartered Accountants in England and Wales, said funds exchanged in virtual communities should be regarded as genuine financial instruments covered by existing laws and regulations.

Steven Philippsohn, chair of the panel's cybercrime working group, said: "That's the key to successful crime prevention in this evolving area."

The Fraud Advisory Panel highlighted a series of problems arising in virtual communities, including credit card fraud against genuine customers and suppliers, hacking into databases and identity theft, money laundering via false online identities, tax evasion, unregulated cross-border money movements and sales of age-restricted goods and services to children.

The panel warned that virtual communities can be used by organised criminals seeking to avoid surveillance. Philippsohn said: "The legitimate benefits of virtual communities will prove enormous but people need to be aware that this cutting edge technology has a darker side."

Social-networking sites and communities such as the Second Life virtual world - where goods and services are traded using virtual currencies - were not just chat rooms, but also "lucrative and growing marketplaces" he added.

"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."

The panel's findings are based on a report commissioned from Mark Johnson of risk management firm TRMG.

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