The Ministry of Commerce for The Peoples Republic Of China joins Korea in announcing a new initiative to implement controls on the conversion of virtual to physical currency. The press release on the MOFCOM site highlights the scope of the problem:

According to media reports, the virtual money trade topped several billion yuan (￥1B=US$146M)  last year after rising around 20 percent annually.

Though this move seems to be targeted towards individuals bypassing tax payments by transacting online money for real goods and services, it also touches on the greater problems of CyberLaudering and Gold Farming.

Gold Farming is of course not shovel, pick and dirt. It’s the act of playing an online game to earn game currency, and then exchanging this with someone else for hard currency. This is against the terms of use for most online games, Second Life, World of Warcraft etc, but because there are people (typically in the West) with more money than time, and people in emerging markets like China and India with more time than money, it was obvious that something like this was going to happen.

The money-starved spend their time generating online wealth, and then sell that to the time-starved for real money. Although eBay banned the sale of virtual items back in 2007 (typically swords and other ‘power ups’ for MMORPG’s), there are still innumerable ways of performing the transaction.
Nick Ryan’s article on gold farming indicates the market to be worth around US$10B per year, with over 1 million people involved. Though the Ministry of Commerce does not talk about this specific problem, it does mention that taking currency transactions outside the traditional money markets has the potential to impact the real financial systems.

Though there are reports of fairly benign (but out-of-band) transactions, gamers buying groceries etc by exchanging popular ‘QQ Coins‘, there are a lot more reports of criminals using the virtual>physical transfer to launder money. As many games allow both conversion of physical>virtual and virtual>physical transactions, often at the same rate less a handling fee, this “cyberlaundering”  is an attractive route for criminals because it plays on the novel routes our law enforcement agencies are ill equipped to handle.
One simple route to doing this is for a collusion of buyers and sellers to transact online items at strange prices – for example the seller offers some trivial item for sale for some outrageous price, e.g. 1000 virtual coins, the buyer purchases this using virtual coins bought with stolen money. The seller then cashes out his profit back to US$ and the money is washed clean.
Of course the nature of the online world means that such transactions can be relatively small and numerous – it’s no problem to use technology to open hundreds, or thousands of accounts to move money without ever coming up on the radar.
For those who think of online services such as Second Life and World of Warcraft as “games”, consider this – if you could sit at your computer all day and play the “game”, yet at the end of the day be US$500 better off, tax free, and untraceable, wouldn’t that appeal?


Source: http://simonhunt.wordpress.com/2009/07/02/china-takes-steps-to-criminalize-gold-farming/

The truth is that technology has created the means and ability to launder money by use of completely untraceable digital currency. While current money laundering laws apply to the fledgling art of cyberlaundering, the actual effect of these laws may be limited.

Structuring of transactions so as to avoid currency reporting requirements becomes less risky if the funds used to structure are virtually untraceable. In addition, the filing of currency transaction reports may be pointless if the money can not be traced into a specific account. However, the actual requirement that a transaction report be filed may be nonexistent if cyberbanks which accept ecash deposit accounts do not fall under current federal or state regulation of financial institutions.

For these reasons, most of the governments are  worried that the Internet may become a launderer's paradise. Nevertheless, should completely anonymous digital cash be prohibited or secretly monitored  for the reason that it may facilitate some illegal activities?

I think that prohibiting or secretly monitoring ecash transactions on the grounds that such transactions are difficult .

Anti-money laundering regulations in the UK are set to become more stringent with the introduction of the FSA’s new rules and the Proceeds of Crime Bill going through Parliament. However cyber-laundering is more than a natinal problem. The Internet is no respecter of national borders. As with any regulation of the Internet, international co-operation is very important.

 In terms of law-making, governments have been working together for many years. The two main international agreements addressing money laundering are the 1988 UN Vienna Convention and the 1990 Council of Europe Convention. However money laundering is still common. The use of technology is only likely to make worse the jurisdictional difficulties faced by prosecuting offendrs and authorities.


In 1986, the Money Laundering Control Act attempted to close the ways in the prior law that allowed for the structuring of transactions to flourish. Under the Act, the filing of a currency transaction report (CTR) is required even if a bank employee "has knowledge" of any attempted structuring. Thus, it appeared as if the ability to launder the profits from illegal activity would be severely stopped.


Regarding to legal issue and finantial scurity, greater co-operation is required between agencies of different jurisdictions to share information and carry out investigations quickly before it becomes too late.


The FATF is the main international body devoted to combating money laundering. It has made 40 compelet and clear recommendations covering areas such as customer identification, minimum standards of record-keeping,


co-operation between banks and supervisory and law enforcement agencies and suspicious transaction reporting (STR).


One recommendation is that international organisations such as Interpol be given responsibility for gathering and disseminating information to national authorities about the latest developments in money laundering. Another recommendation is that, whilst safeguarding privacy and data protection, improvements should be made in respect of spontaneous or “upon request” international information exchange.[1]




Source:
[1]http://www.ibls.com/495188105766404004&postID=5727315654307800179

In law, money laundering is the practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money


Cyberlaundering by means of anonymous digital cash is the natural evolution of money laundering, or what we call throughout the site legacy laundering or just plain money laundering.

Abviously, as Internet has made commerce easy and ideal, also it has made it ideal for money laundering .Some of the reasons that offenders use, or better to say, abuse internet for Cyberlaundering are as follow:


• Speed


• Access


• Anonymity


• Capacity to extend beyond national border

Cyberlaundering is electronic transfer of illegally-obtained monies with the goal of hiding its source and possibly its destination. Being that most monetary assets have moved into the digital realm, it makes sense that one of the most recurrent financial crimes has evolved as well. Money laundering is simply taking illegal gains from some class of illegal activity and filtering the funds back into a legitimate economic system. Some definitions clearly say that it is the transforming of the dirty money into clean money, but the more problematical issue is making the money appear legal in the according to law and government. (integration, the third step and last step in the general laundering model).

Applying law and legislation needs to consider about the use of new technology. The Courts in England can interpret legislation with a view to identifying and priventing ilegal activities for which the court considers the legislation was designed. It is therefore possible that such legal interpretation can be used to adapt the existing legislation to the new technology.

However the Courts may not always be able to interpret legislation to cover all situations that may be posed by technology. In particular, the Human Rights Act requires Courts, as public bodies, to interpret legislation in a way that is acceptable with human rights such as the right to respect for private life. The Courts may therefore have to consider that in mind when balancing the competing interests of the individual’s privacy rights and the State’s need for third parties to disclose distrustful transactions in order to combat crime.

One example of legislative action being taken to reduce money laundering through the Internet is a bill introduced in Canada last year to ban the use of virtually any kind of bank instrument for the use of gambling over the Internet, for fear that virtual casinos are suitable for abuse in term of money laundering.

First I think it is very usefull to get  and find the exact meaning of money laundering. I found this video at http://www.getlegaltv.com/ and I think which it is the best preception and exact describe of Money laundering which is same as cyberlaundering.