Banks Come out Winners in Internet Gambling Bill

By Ware, Viveca | Independent Banker, January 2008 | Go to article overview
Save to active project

Banks Come out Winners in Internet Gambling Bill


Ware, Viveca, Independent Banker


The banking industry's one-year wait for proposed regulations requiring financial institutions to identify and block payments between gambling customers and illegal Internet gambling companies is over. When finalized, the muchanticipated regulations will implement the Unlawful Internet Gambling Enforcement Act of 2006. The law required the Federal Reserve Board and the U.S. Treasury Department to issue regulations that set procedures for blocking illegal Internet gambling transactions in the payment system.

ICBA was the only banking trade association to actively voice concern over the slippery regulatory slope created by the then-proposed law. ICBA's concern registered with lawmakers, who, in response, added a provision to the law, granting the Federal Reserve and the Treasury the authority to exempt certain transactions when transaction tracking and blocking was not reasonably practical.

Thankfully, the agencies used this exemption authority to write a very narrow and reasonable regulatory proposal that would primarily affect only those financial institutions maintaining a direct relationship with an unlawful Internet gambling company. This approach, coupled with the fact that few of these companies maintain direct account relationships with U.S. financial institutions, substantially limits community banks' compliance burden.

The Regulation's Scope

The proposed regulation, Prohibition on Funding of Unlawful Internet Gambling (Regulation GG):

* Designates payment systems that could be used in connection with unlawful Internet gambling;

* Requires designated payment system participants to establish written policies and procedures reasonably designed to identify and block restricted transactions;

* Exempts certain payment system participants from requirements when it is not reasonably practical to identify and block transactions;

* Describes policies and procedures that non-exempt participants may adopt to comply;

* Does not specify which gambling activities or transactions are legal or illegal consistent with the law; and

* Does not alter state, local or tribal gaming laws.

Rather than exempt all participants in certain payment systems, the agencies grant exemptions based on a participant's role. Consequently, most ACH, check and wire-transfer system participants are exempt.

Payment system participants not exempt from compliance include: banks that maintain customer relationships with Internet gambling companies; card systems (debit, credit, prepaid or stored value); banks that receive cross-border transactions; banks that send transactions to foreign payment service providers; and money transmitting businesses.

Handling Compliance

All non-exempt or covered payment system participants, under the proposed regulations, must establish and implement written policies and procedures to identify and block restricted transactions. Financial institutions can establish their own policies and procedures or rely on and comply with policies and procedures established by a designated payment system. For example, most financial institutions will likely rely on card network rules and procedures to comply with the final regulations.

Financial institutions holding direct customer relationships with Internet gambling businesses should exercise reasonable due diligence to ensure that the relationship is not used for sending or receiving restricted transactions. Financial institutions covered by this compliance requirement include those: originating ACH debit transactions, receiving ACH credit transactions, serving as a depositary bank in a check collection system, acting as a beneficiary bank in wire transfer systems, and maintaining relationships with ACH third-party senders.

Policies and procedures should include the screening of potential commercial customers to ascertain the nature of their business, as required under the agencies' anti-money laundering program and a provision in the deposit agreement prohibiting restricted transactions.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Banks Come out Winners in Internet Gambling Bill
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?