Yes, servers are indeed allowed to monitor private messages if there is suspicion of 'bug abuse, disruptive behavior, or other illegal activities', in addition to 'abusive' activities. Whether or not it is technically possibly for non-Graal Online administrators to do so, I'm not entirely sure.
The 'Rules of Conduct' are pretty clear on what level of privacy you can reasonably expect:
Quote:
GraalOnline policy will respect each individual player's privacy to communicate unless there is a reasonable concern that such conversations relate to bug abuse, disruptive behavior, or other illegal activities. It must be made clear that all actions and conversations within GraalOnline are subject to monitoring. Should a player or players be suspected of illegal or abusive activity, GraalOnline reserves the right to use administration tools to monitor individuals' communications via chats and other private messages.
GraalOnline staff and personnel will never single out individual personal information when communicating to other players or outside parties. GraalOnline expects GraalOnline players to abide by the same respect for personal privacy. Personal information - age, address, personal email, phone numbers, etc. - should never be exploited, communicated between players. Any violations will be strictly punished.
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http://www.graalonline.com/accounts/rules.php?page=1