Under Manage -> Character (in the right-hand menu), click Drop Character and confirm. Your character will be turned into a Lost Soul custom NPC and you will be able to create a new character after a three week waiting period.
Yes it is faster. It is also very good way to earn bann. There is some explanation in rules section, if you are willing to search. As for 3 weeks been long, it is as it is. And will not likely change for a long time.
Haven't gotten caught yet maybe. The penalty sometimes manifests in asset loss and longer ban durations, so it can be even more harmful if multi-accounts are maintained over a longer period of time. :p If you do know of someone, you should report them before they make the situation worse for themselves, however.