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The Government Holds All the Cards

By: Kari English

I don’t understand the allure of gambling. I tend to lose my money quickly — shocking, I know, considering the odds are stacked against me in the first place. Nevertheless, many people in this country love to gamble. But those who like to gamble online have had a harder time doing so since the Unlawful Internet Gambling Enforcement Act of 2006. Essentially, in an effort to reduce the amount of online gambling, the law banned financial institutions from transmitting payments to and from gambling operators.

According to the American Bankers Association’s website, the final rule “imposes certain responsibilities on banks to demonstrate through written policies and procedures that they are taking precautions when opening commercial accounts that may operate as illegal Internet gambling entities. If illegal Internet casinos are denied the opportunity to open a bank account, they will be denied the opportunity to make and receive payments.”

“It is likely to make life more difficult for banks — especially small community banks — who will find it a great burden to police transactions that might be related to Internet gambling,” Kevin Di Gregory, a partner at Manatt, Phelps & Phillips, told Forbes in June.

Great. As if small community banks didn’t have enough problems already, right? The deadline for financial institutions to comply with this law was June 1 — that’s an extension from the original Dec. 1, 2009, deadline. So, if you aren’t in compliance you should do it quickly.

According to the Federal Reserve, the most efficient way for banks to comply with this law is through due diligence, which could be incorporated into existing account-opening procedures. The Fed suggests that institutions should have a basic understanding of a new commercial customer’s business, based on normal account-opening procedures. “If, based on your initial due diligence, you determine that your prospective commercial customer presents only a minimal risk of engaging in an Internet gambling business, you do not need to take further action under the rule before opening the account,” the Federal Reserve website states.

For those of you who are already in compliance, you have nothing to worry about, right? Not at the moment, anyway. But Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee, is sponsoring HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, which would legalize online poker and other casino-type gambling. (Frank wants the tax money from Internet gambling for budget issues.) The bill passed the House Financial Services Committee on July 28.

After spending time, energy and money implementing compliance procedures for unlawful Internet gambling, it may all be for naught in the coming years. Ever feel like the odds are stacked against you?

To learn more about this law and complying with it, click the link below.

Unlawful Internet Gambling

Kari English is senior editor of BankNews.

Copyright © September 2010 BankNews Media


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