a question about neteller loophole....good news?

[mikeh1975]

NEW YORK Experts say a new Internet gambling ban won't keep bettors from ponying up, just turn them on to overseas payment services out of the law's reach.

I. Nelson Rose teaches gambling law at Whittier Law School.

He says the new law has put a scare into people but it won't wipe out Internet gambling.

President Bush signed the bill into law on October 13th.

It seeks to ban most online gambling and criminalizes funds transfers.

The new law gives the U-S Treasury, Federal Reserve, and Attorney General 270 days to establish policies and procedures.

Rose says clamping down on the banks won't serve as a panacea, because banks often move money to payment processors who operate legally overseas.

Those processors like Neteller then transfer the money to the Internet gambling sites.

Las Vegas gambling lawyer Anthony Cabot also says he thinks the language used in the bill provides a loophole for U-S banks that want to do business with such e-Wallet sites

i was wondering if this is true? if this does have a chance of happening its great......

[mikeh1975]

Congress Giveth with the Right Hand & Taketh Away with the Left
President Bush signed two bills on Friday the 13th which will have contradictory effects on banks. First, the Regulatory Relief Bill, which adopts some measures intended to reduce regulatory burden on financial institutions and allow them to get back to the business of banking. Second, the Unlawful Internet Gambling Enforcement Act, which was attached to "The Safe Ports Act".

Who can argue with the stated purpose of the Unlawful Internet Gambling Enforcement bill? No one is opposed to protecting children from the evils of and possible addiction to Internet Gambling. The problems lie in the implementation. Once again, banks are assigned the role of "policemen" for illegal activities they don't engage in themselves. Is this fair? Is it effective? Is it even possible?

The Unlawful Internet Gambling Enforcement Act of 2006 prohibits gambling enterprises from knowingly accepting payments in connection with unlawful Internet gambling. The Federal Reserve and Treasury are jointly charged with writing regulations, within 270 days of bill passage, which will detail policies and procedures financial institutions must adopt to identify and block illegal transactions.

First problem: Not all Internet Gambling is made illegal under this bill. For example, betting on horse racing is authorized by the Interstate Horseracing Act. Betting on some sports in Delaware, Nevada, and Oregon, is also legally grandfathered by the Amateur Sports Protection Act. Casino gambling on Indian reservations is legal and excluded from the force of this bill, as are State lotteries.

Second problem: Financial institutions are being called upon to distinguish "legal" from "illegal" Internet gambling. This does not sound like the business of banking. The bill actually requires banks to block "illegal" transactions, but requires them to ensure that legal transactions are not blocked. Maybe the Fed/Treasury regs can provide some guidance, but even if they do, banks will have to hire and train personnel to follow the guidance and keep up with all the record retention and reporting that this new burdensome duty will entail.

Fortunately, testimony from the Independent Community Bankers Association and others apparently resulted in bill language authorizing the Fed & Treasury to exempt payment methods from the "identify and block" requirements if such payments (like checks and ACH transactions) simply do not capture information in such a way as to make it "reasonably practical" to include them. So the bill seems to be aimed primarily at credit card transactions.

Banks already have a heavy burden in complying with Bank Secrecy Act/USA PATRIOT Act/Anti-money laundering legislation and regulations. Banks already are required to file Suspicious Activity Reports (SARs) covering any illegal activity they detect in the course of providing financial services. The Unlawful Internet Gambling Enforcement Act, however, goes way beyond reporting. It requires banks to stop a transaction in its tracks as it is occurring.

Small, community banks will bear a disproportionate cost for this new responsibility. In a small bank, hiring and training even one more person and purchasing whatever detection-and-blocking system is required will impose a cost that matters to the bank's bottom line. Moreover, the cost and the time required to comply will fall on the institution's legitimate customers and the community it serves. Time and money spent on this compliance issue are time and money diverted from the business of providing loans, deposit accounts, and other much-needed banking services.

Further, financial institutions are an integral part of our national "payments system". The U.S. economy depends on speedy, cost-effective processing of financial transactions. Slowing that system down with "identify and block" requirements will have unintended consequences. The payments system is just not set up to perform this function. Some aspects of the payments system are not capable of being reengineered to accommodate it.

What about customers whose legitimate transactions are incorrectly blocked? Although the bill provides a safe harbor for financial institutions that make such a mistake, those customers are bound to be "mad as heck".

Here's my take: If Congress wants to prohibit gambling, let them do it across-the-board (not going to happen). If there are penalties, they should fall on the entity that commits the illegal act. Please don't make banks the enforcers. That's not their job. Please don't impose more compliance costs for an "identify and block" function that is unlikely to work.

(ag) October 16, 2006, in Congress

[mikeh1975]

what i'm wondering is if it would be easier to slip through the cracks at a small bank with these transactions than it would a larger well known bank?

[DuderinoAB]

Enjoy conversing with yourself?

[mikeh1975]

yep