Virtual Worlds As a Possible Alternate Remittance System ARS

They have many generic names; underground banking, parallel banking and so forth. Indeed, specific remittance systems many be known to you as Hawala, Hundi or Da shu gong si. The Financial Action Task Force groups all of these together under one generic name: an Alternate Remittance System (ARS). A system of transferring monies from one place to another which bypasses the important checks and balances in the normal banking system, and one which is worryingly used by both Money Launderers (ML) and Terrorist Financing (TF).

So where do Virtual Worlds come in?

Well, a number of virtual worlds have set themselves up, as part of their business model, as places where players can invest their monies into virtual game world cash units, trade in these said units to gain in-world goods, and then extract these units in the form of cash again. The worry being, as communicated by a number of different, and prominent, individuals and organisations, that this set of transactions, these mechanisms of transfer if you like, many possibly facilitate ML or TF activities and operations.


Generically what we are talking about is the interaction of the transfer of value. To give you a (generic) example:

Bob lives in a country with an extremely highly regulated banking sector.

Bill lives in a country who’s banking sector has been recently removed from the Financial Action Task Forces NCCT “watch-list” of countries who have poor banking regulation.

Bill plays a highly popular MMO-Virtual World in which you can buy virtual cash and extract this virtual cash from the game world at a later date. Bob does the same.

Bill transfers about $100 worth of his money from his bank in this low regulation regime and buy’s virtual cash with it.

Bill’s avatar in the game now has this virtual cash.

In the game, Bill’s avatar goes upto Bob and gives Bob’s avatar this virtual currency.

Bob then transfers this virtual currency from this virtual cash which exists on his avatar back into real world cash in his bank account.

So what do we have in this example? We have a simplistic transfer of value from a low regulation banking regime to a high regulation regime which has bypassed the active regulators, in effect, the checks and balances. Bob could then go on to move this money (probably through back to back transfers) onwards to a further destination.

Still not see the issue? To take (quite literally) the most extreme example I can think of; lets suppose Bob was a terrorist in North America, and Bill was financing his terrorist cell from (for example) Egypt… Now you start to see why so many people are so very worried about this.


Though the example is simplistic, the mechanisms which allowed this possible transfer to occur are:

Relative ease of setting up an account in a low regulation countries

Ability to buy in-game currency from bank accounts created in low regulation countries

The ability to transfer funds in-game between avatars (i.e. players, users)

Lack of transparency over why transactions occur in-game

Lack of an audit trail of transactions conducted in-game

Ability to transfer out of the game virtual assets for real currency

Of these mechanisms (of which this is not an exhaustive list by any measure) these are a number of areas for further examination.

Can this be tested? And how?

Indeed. Testing is possible. And Legally too.

Next time you’re in a country with which has recently been taken off the NCCT banking list remember to take all the details needed to set up a bank account (you might be surprised how few you need in some places…) and legally set one up, paying in $100. Next set up a Virtual World account and transfer in the monies from this account (all hunky-dory legal-like as they say)

Next, get your wife or partner to set up a virtual world account (indeed, of all the difficult bits to do, this could be the most pressing, I highly recommend promising her the $100 for a dinner out) and then have her avatar meet with your’s in game and make the transfer. She can then extract the cash and you’ll be able to go on a dinner date…presumably at least slightly worried as you eat your food at how easily you’ve transferred the money over.

The real deal?

No. I don’t think so, quite honestly, not yet. Not as an ARS anyway at the moment.

There is a significant difference between highlighting it can be done, and saying it is. The main issue being for the most part being volumes. Quite simply, despite what I’ve highlighted, the volumes of trade conducted in Virtual Worlds at the moment do not see to support the volumes needed for large scale Money Laundering or Terrorist Financing.

I see this as a threat, something that games designers, games publishers, legislators and enforcement agencies should be aware of, and as these virtual worlds increase in size, and the volumes do increase to the point where them being used as an ARS becomes an issue, let us hope that the structures are in place to deal with this because these people where forewarned.

My personal view is that Trade Based Money Laundering using Virtual Worlds is much more worrying a possibility than them being used as ARS. Though many will disagree with that view I’m sure.

What is needed?

My personal view is quite simple.

If it acts like a bank, it feels like a bank, and it operates like a bank….. Then it needs to be treated like one by regulators. Though it might be a virtual world game, any virtual world game which operates a real world money transfer system which allows players to transact within the game economy should be operating within a more stringent set of rules.

This isn’t however down to one company. As singling out a single company or indeed game world in entirely and wholly unfair. This needs to be something tackled by the computer games industry, hopefully in conjunction with the Banking Sector, so that appropriate rules and regulations may be put in place to prevent abuse of these game worlds.

David Grundy

(I’m aware I’m using a lot of acronyms here, my apologies, I’ve tried my best to explain each on I have used, but if you’re not following one, don’t be shy, and leave a comment below.)

Posted in Uncategorized.

Leave a Reply