In Focus Risk
Transferring value over the world wide web
Crypto-currencies online offer new opportunities for fraudsters, but also for businesses
Tim Harvey Global head of chapter development, Association of Certified Fraud Examiners
tharvey@acfe.com
Whenever a new technology emerges, it is tested to destruction by criminals, and the world wide web was no exception to this. Considering its relative youth, the world
wide web has been one of the greatest assets to the criminal world. Technically savvy criminals have wasted no time in exploiting every aspect from sending 419 e-mails, to utilising anonymity to conduct romance frauds, boiler-room frauds, phishing, and every other type of fraud conceivable. Last year in the UK there were 3.6 million
online frauds, 70% of which are committed using the internet; a staggering figure.
E-gold There is, today, a great deal of interest in crypto-currencies. However, it is no surprise that, early in the web’s history, a need was identified to transfer value across the internet without giving your credit-card number or personal details, which were always the target of the criminal. So, in 1996, 21 years ago, an oncologist,
Douglas Jackson, and lawyer, Barry Downey, founded E-gold. They deposited gold coins in a bank in Florida and created a website for e-gold. To use the e-gold, you would open an account at the website and pay money to E-gold by wire transfer. You would be credited with grams, or fractions thereof, of e-gold, which you could use on the web as a digital currency. This worked well and, by 1999, the Financial Times described it as “the only electronic currency that has achieved critical mass on the web”. At its peak, it was processing $2bn per year, although whether the number of gold coins deposited went up proportionally is unknown!
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It is no surprise that, early in the web’s history, a need was identified to transfer value across the internet without giving your credit-card number or personal details, which were always the target of the criminal
“any kind of value from one person to another” and prosecuted E-gold for not having a money transmitter’s licence. Had E-gold complied with the regulations, I think it may still have been around today. So, we can see that digital currencies are not a new phenomenon.
Role-playing games There are other ways of transferring value across the web that are based on gaming currencies and virtual currencies. There are hundreds of MMORPs – massively multi- player online role-playing games – out there, many of which use their own currency. Rift is one such game whose players have
E-gold was imitated by EBullion, Crown
gold, INT gold, and a Ponzi scheme with no gold at all called OS gold! The gold accounts were pseudonymous so users could use any names they liked, but the transactions to real-world currency linked them sometimes, by a third-party exchange, to real users. The fact that they appeared anonymous,
made accounts desirable for use by criminals who targeted e-gold accounts for hacking. E-gold was a pioneering enterprise and, at one stage, it asked the Treasury if it was a currency. The USA may have been frightened that a second currency in their country may pose a threat to the dollar, but, in any event, they excluded e-gold from the definition of a currency. However, by 2008, the Treasury redefined ‘money transmitter’ to include the transfer of
www.CCRMagazine.co.uk
logged a total of 45,817 years of gameplay. World of Warcraft has over 10 million subscribers, exceeding Call of Duty Black Ops and Grand Theft Auto, whilst Forging Empires has 14 million registered players. Other games exist aimed at our children. Club Penguin uses its own currency and is aimed at six to 14-year-olds. The gaming industry holds its own
equivalent of the BAFTA awards and is a huge economy. It will come as no surprise that organised criminal gangs have developed malware to steal weapons and gaming currency from gamers. There was even a ransomware created to lock players out of their games until the ransom was paid.
Virtual worlds Currencies are also used in virtual worlds. Many of these exist as an extension of social networking, where people can meet and interact with each other; the biggest and best-known of these is Second Life. This
November 2017
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