Virtual Financial Crime and Commonwealth Jurisdictional Issues

Dr Clare Chambers-JonesClare.chambers@uwe.ac.uk

Associate Professor of Banking and Finance LawGeneral Secretary of the Commonwealth Legal Education Association

UWE Bristol@DocChambers @1971CLEA

Aims of the presentation

• What is virtual /cyber financial crime?• Case analysis of cyber financial crime• Commonwealth legislation

– Australia– Nigeria

• Jurisdictional Elements• Technical barriers• The future

Defining Virtual/ Cyber financial crime

• Cybercrime is any criminal activity having taken place via the internet, smart phone or other electronic means.

• Virtual financial crime is where financial crimes such as fraud, money laundering, scams etc… take place on the internet.

• It is part of the cybercrime umbrella.

Cyber financial crime

• British Fraud Advisory Panel (FAP) “there is nothing virtual about online crime, it is all too real. It is time the government took this serious”.

• Cybercrime costs $388bn annually with 69% of adults having experienced some sort of cybercrime in their lifetime. (Norton 2011)

• Cybercrime whether it is economic or social, “is one of the fastest growing areas of crime, as more and more criminals exploit the speech, convenience and anonymity that modern technologies offer in order to commit a diverse range of crimes” (Interpol 2008).

Cyber financial crime

• Interpol: “the global nature of the Internet allows criminals to commit almost any illegal activity anywhere in the world, which makes it essential for all countries to adopt their domestic offline controls to cover crimes committed in cyberspace”.

Virtual Worlds

• Cyber crimes are not just being committed on the internet but also in virtual world games

• Virtual world games are those which replicate world and allow you as an avatar to interact with the world around you. E.g. Second Life

• Adds another layer of complexity for regulation, anonymity and traceability

Virtual Money Laundering

• Three stages to laundering money from illegal gains. – Placing, – layering and – integration.

• Problem = anonymity and lack of a joined up and modern response

Money from illegal Gains enters VW

via Payment method

Such as Pay Pal

Real money is converted

Into virtual money

Virtual moneyPurchases

Virtual goods

Virtual goodsAre sold

Virtual moneyIs converted

Back toReal money and

exists VW

Cases of virtual economic crime

• Gold Farming

• Virtual Money Inc• E-Gold Case• The ShadowCrew Ring• 2010 Eve online virtual credit crunch and bank

run

Commonwealth Approach

• Why the commonwealth?• Law Ministers Meeting Perth 2011 – agenda• Commonwealth Model law On Computers and

Computer Related Crime• Budapest Convention of Cyber crime• Scheme on Mutual Assistance in criminal

Matters (Harare Principles)

Commonwealth Model Law 2002

• From the Council of Europe’s 2001 Convention on Cybercrime

• Aim to “protect the integrity of computer systems and the confidentiality, integrity and availability of data, prevent abuse of such systems and facilitate the gathering and use of electronic evidence”.

• Central Authority for instant cooperation• Out dated, terminology and IT systems

EU Convention (Budapest Convention)on cyber crime 2001

• Accepted as most comprehensive legislation of its kind

• Provides more direct and in places, progressive legislative policies than Model law

• Out dated and requires modernisation • Central Authority for instant cooperation• European Wide

Criminalization

Procedures

Electronic evidence

Jurisdiction

Service Provider Liability

International Cooperation

Criminalization

Procedures

Jurisdiction

International Cooperation

Council of Europe Convention on Cybercrime

Criminalization

Procedures

Electronic evidence

Jurisdiction

International Cooperation

Commonwealth Model Legislation

Scheme on Mutual Assistance in criminal Matters (Harare Principles)

• Amended in 1990, November 2002 and October 2005

• Section 1(3)(a-j) assistance to other countries for the purposes of cybercrimes: (a,d,e,I,j)

• Central Authority• Modernistic approach reading in conjunction• Provides useful tools for the tracing proceeds

of crime s28 – link to cybcercrime

Australia

• 2001 the Cyber Crime Act– Narrow definition of cyber crime than that in the

convention or Model law• The Cyber Crime Amendment Bill 2011 • Part of organised and serious crime• The Serious and Organised Crime Act 2010

– No mention of cyber crime

Nigeria

• Improve image of being hub of cybercrime• 2005 the Financial Intelligence Unit (NFIU) in

Combatting Financial Crime created as part of the United National Convention Against Corruption Articles 14 and 58

• No direct cybercrime acts• Computer Security and Critical Information

Infrastructure Protection Bill 2005, or the Cybercrime Bill.

Jurisdictional issues

• No joined up legislative force• Issues of sovereignty and constitutional rights

such as human rights • Chik believes that “the speed at which

information technology has developed requires a faster, more reactive and automatic response for the law and that is not currently met by the existing law-making framework”.

• Can we ever regulate the internet???

If not law what about technology?

• Technical barriers

• ISP and internet governance

• Digital Economy Act – judicial review – rejected ground barring one relating to costs

Technology vs Rule of Law• Reidenberg: ‘for democratic societies, adherence to the rule of

law means that the use of any technological enforcement instrument necessitates carefully prescribed authorisation criteria,’

• Choice of the instrument used must be the ‘least intrusive to accomplish rule enforcement’.

• 1) a state must weigh the magnitude of any threat to public order;

• 2) the urgency of the threat must be considered; • 3) the state must evaluate the effectiveness of the tool used, and • 4) the state must consider the ultimately enforcement goal

What next?

• Present laws out dated and not sufficient to keep pace with modern criminality and the internet

• Technological barriers must adhere to domestic constitutional principles

• Commonwealth Initiative on Cybercrime in progress

What next?

Is a cross jurisdictional law favoured?

NOJudge Stein Schjolberg proposed the

“Cyberspace Treaty” to the United Nations 2010Rejected

Human rights and Constitutional difference between countries

Thank You

Any questions?Clare.chambers@uwe.ac.uk