UIGEA regulations proposed

[jetset]

UIGEA REGS ATTRACT MORE BANKING FLAK

Now lobbyists warn US Treasury that regulations present major compliance problems

US Treasury drafters of the proposed regulations supporting the Unlawful Internet Gambling Enforcement Act faced further opposition this week as their work was criticised by banking lobbyists. The Financial Services Round Table, an expert body representing many top banks and financial services companies, warned that the regulations present major compliance obstacles unless the Bush administration clarifies its conflicting views on online betting.

The experts were responding to Treasury requests for opinions on its proposed and much delayed regulations, which are intended to give teeth to an unpopular law rammed through Congress late last year on the coat tails of an unrelated security law. The law's purpose is to disrupt financial transactions with online gambling companies in sectors not exempted by discriminatory and confusing American state and federal legislation.

Roundtablers said they were "very concerned" that adoption of the rules could impose "significant" and costly compliance burdens on banks, The Financial Times reported.

Once again, financial professionals expressed reservations about being tasked with an essentially policing responsibility. "The statute and the proposed rule expand the role of financial institutions to police laws that are more appropriate for law enforcement agencies," the Roundtable said in public filings to the Treasury and Federal Reserve.

The criticism raises new questions about whether regulators will be able to enforce a law that, in effect, requires banks and other institutions to know the purpose and legality of payments in an industry - online gambling - in which federal and state rules often conflict.

The proposed rules would require US financial companies with designated payments systems to have policies and procedures that are "reasonably designed" to prevent payments being made to illegal gambling businesses. According to the US Treasury, illegal gambling consists of any bet or wager involving the internet that is illegal in the state in which the bet is made.

At the centre of concerns raised by the Roundtable is the fact that it is far from clear whether banks would also have to block payments from US-based gambling sites, including websites that take bets on horses over the Internet.

The US Justice Department has long held the view that online interstate betting (within the US) on horses is illegal. However, the established horse-betting websites have never been prosecuted, and Internet operations are growing. The horse-betting industry maintains that state laws allowing wagers on horses trump federal laws. Legislators left the issue alone last year by including language in the anti-online gambling legislation that said it did not apply to wagers on horses, state lotteries and fantasy sports.

In comments about the proposed rules, Bank of America said the US should provide a list of specific entities with whom banks are forbidden to take payments in the absence of an "unambiguous" definition of what is legal.

"Without [a definition], financial institutions will be forced to block legitimate transactions in order to avoid the possibility of permitting an illegal transaction," it said. The government has thus far declined to do this.

Meanwhile, confusion is already apparent in exactly what the European Union, Canada and Japan deal with the United States in the World Trade Organisation compensation issue comprises.

Only days after announcements by the EU and the US Trade Representative, the latter accused media of "misrepresenting" the agreement.

A spokeswoman said the agreement, in which the US offered concessions on the postal, courier and a number of other sectors, would not involve "any change" in US law or practice and was simply intended to provide "greater legal certainty" to some sectors. The EU statement, on the other hand referred to "new concessions" (see previous InfoPowa reports.)

[Trezz]

Great thread jetset!

I wanted to add some info that may or may not be relevant, I'll leave that up to you to decide.

Before the UIGEA came into affect, I'd receive an aff payment via wire. As it was US funds. If they didn't hit my bank in Australia with 24 hours, they'd be here in under 48h.

After the UIGEA if payment arrived in under 5 days I was fortunate.

However (and this is the point), I've had other wires from the US that are not gambling related and they arrive like clockwork in under 24 hours.

It's obvious to me that processing companies known to process gambling funds have already been red flagged in the USA.



Cheers

Trezz

[jetset]

200 RESPONSES ON UIGEA REGS

The impracticalities of trying to discriminate against an industry through the financial sector

A thoroughly researched article on responses to the US government's request for comment on its proposed regulations for the UIGEA caught our eye in the Washington Post this week.

Written by Cindy Skrzycki, a regulatory columnist for Bloomberg News, the piece explored this controversial law introduced under such questionable circumstances in late 2006, which seeks to prohibit financial transactions with online gambling companies, placing the burden of implementation principally on the US banking industry.

The complexity of enforcing such a law through many millions of transactions involving hundreds of thousands of citizens and commercial organisations using a variety of financial instruments, especially when the laws concerning online gambling in the United States are discriminatory and confusing, is the subject of many an industry discussion. Ms. Skrzycki tackles the subject from the perspective of the 200 or more critiques of the regulations received by the Treasury Department and the Federal Reserve after the proposals were published for comment.

The article observes that it's not easy making rules for a U.S. law intended to deter 'illegal' Internet gambling by choking off the flow of funds to offshore sites. That's because no one seems to agree on what the law covers.

Officials at the Treasury Department and the Federal Reserve found that out after sifting through more than 200 comments from banks, gamblers, church groups and members of Congress on recommendations for regulations giving force to the Unlawful Internet Gambling Enforcement Act of 2006.

The consensus was that the administration's proposals framed last year, which depend on financial institution enforcement, won't work.

Ms. Skrzycki observes that the outcome will affect 23 million online gamblers, some 2 500 Internet sites and the growth of an industry with an estimated immediate potential for $15 billion in annual global revenue.

The law bars financial institutions from processing payments involving Internet gambling - with the notable exceptions of Indian gaming, state gaming and horse racing carve-outs which have themselves embroiled the US in an expensive fracas in the World Trade Organisation.

"If the federal agencies themselves cannot agree on the law, what hope is there that banks can resolve these confounding legal issues?" the American Bankers Association said in commenting on a conflict between the Treasury and Justice departments on the legality of betting on horses.

The Washington trade group said the suggested rules are more likely to catch its members in a compliance trap than stop profits from illegal gambling from escaping offshore.

The proposal says generally that it covers the making of bets on the Internet that already are illegal under state or federal law. It just doesn't spell out the detail.

Banks and other financial institutions would have to make a reasonable effort to stop payments to Internet gambling sites through credit cards, checks or electronic funds transfer.

The final rule is overdue, as regulators review the flood of comments. When originally passed in late 2006, the administration was given 270 days - now long passed - to give teeth to the new law.

"This is an issue that there is so much interest in that we don't want to rush," said Jennifer Zuccarelli, a spokeswoman for the Treasury Department. "We are just trying to hear from everyone."

There are a variety of complaints. Gamblers point to what they see as hypocrisy in the proposal. Why hamper Internet gambling, they argue, when states enthusiastically license casinos, and taking long odds on a state lottery ticket is perfectly legal?

Former senator Alfonse D'Amato, a New York Republican representing the Poker Players Alliance in Washington, told the agencies that its constituency should not even be included because poker is a game of skill, not chance.

"What is legal now?" Joseph Kelly, a professor of business law at the State University of New York College at Buffalo and an expert in online gambling, said in an interview. "God only knows."

"If you operate in Antigua and take sports bets from the U.S., you are committing a felony," he said. On the other hand, sports betting is allowed in Nevada and some other states.

The legal issue is crucial because of conflicting court decisions, differing state laws and applications of older federal laws. Prosecutors and the horse-racing industry have disagreed since 1978 on whether it's legal to bet on horses across state lines. The law said it "is not intended to resolve any existing disagreements over the horseracing law."

Then-Senate Majority Leader and one time presidential hopeful Bill Frist pushed the UIGEA through Congress in a late night session just before it adjourned in 2006, attached to an unrelated and must-pass security bill.

Almost immediately, big players in the industry such as PartyGaming in Gibraltar, which runs the PartyPoker.com and PartyBingo.com Web sites, pulled out of the U.S. market. They had been successful in blocking similar legislation for almost a decade.

"There was a pretty concerted lobbying effort to keep this from happening," Susan Schneider, former head of the Interactive Gaming Council, a trade association in Vancouver, B.C., said in an interview.

Antigua, home to some big online gaming sites, objected through the World Trade Organisation to the U.S. crackdown on Internet gambling, finding support for its view that the US laws were discriminatory and protectionist. The WTO ruled in December that the United States must pay the island nation $21 million for violating trade rules.

The online gambling industry and its suppliers fear that the proposal to place the burden on legitimate payment operators will encourage gambling operators to set up fictitious accounts as a way around any rule.

Republican Sens. John E. Sununu and Pete V. Domenici recently asked regulators to come up with a list of restricted transactions (see previous InfoPowa report). Otherwise, they predicted: "Risk-averse financial institutions will simply choose to block every transaction" that could resemble gambling, "whether legal or not."

Advocates of regulating, taxing and licensing Internet gambling - as some European countries have done - think the United States should appoint a federal commission to study those issues.

In the meantime, Frank Fahrenkopf Jr., president and chief executive of the American Gaming Association, said many privately owned offshore sites continue to let Americans wager, win and lose.

"Money is fungible, and it gets to where it wants to go," Fahrenkopf said. "I don't know of prohibition of anything that ever worked."

[jetset]

FRENCH UIGEA WON'T FLY WITH E.C.

Will the French go ahead anyway on March 31?

A statement by the trade association the European Gaming and Betting Association (EGBA) this week focused attention on a move by the French government to introduce a law against payments to gaming companies unless they are part of the French state monopolies Francaise des Jeux and PMU.

In the statement EGBA secretary general Sigrid Ligne welcomed a decision by the European Commission to issue a detailed opinion arguing against the draft decree proposed by the French.

“Today’s action consolidates the Commission’s position that unjustified payment blocking in our sector clearly contravenes EU law. We welcome the Commission’s action and hope that this will send a clear signal to other EU and EFTA Member States that such proposals will not be tolerated," said Ligne.

The opinion could put a spanner in the works for French plans to adopt the draft decree after March 31st. If it does go ahead in defiance of the EC opinion it could find itself the subject of infringement proceedings.

The decree is the second of two put together under the 2007 French Delinquency Act, the objective being to create technical obstacles which could prevent French gamblers from using gambling and betting sites other than France's protected state monopolies. Apparently the first draft places obligations on Internet Service Providers to discourage users from entering online gambling websites other than those of the state's Francaise des Jeux and PMU monopolies.

Ligne claimed that Germany and Norway are also considering payments restrictions to EU-licensed gaming operators, saying: “Such restrictions are difficult to implement, easy to circumvent, inefficient and foster the growth of an underground market.”

[jetset]

MORE CONGRESSIONAL HEARINGS ON ONLINE GAMBLING PLANNED

Barney Franks gearing up for another debate

The Washington news medium Politico reports that House Financial Services Committee Chairman Barney Frank (D-Mass.), will use a hearing this spring to highlight the headaches he says UIGEA anti-online gambling regulations have created for banks and other financial institutions.

At the end of 2007, and way over their original 270 day deadline, the US Treasury and Federal Reserve published draft proposals of regulations giving teeth to the Unlawful Internet Gambling Enforcement Act which passed in late 2006. The regulations have met with widespread criticism, mainly that the law, which seeks to strangle financial transactions with online gambling companies, would place onerous requirements on the financial institutions that oversee the flow of money - a point Frank hopes his hearing will drive home.

“The banks have a lot of other things to worry about right now,” Frank said, citing the ever-expanding mortgage crisis and a host of other financial woes that have beset the industry this year. “I don’t think poker should be one of them.”

Frank introduced legislation last year to roll back parts of the anti-online gambling law. At the time, the Financial Services Committee chairman said he had no plans to advance that repeal until a sufficient number of colleagues would support it.

So far, 46 Congressmen have signed up to support the Frank Bill, including Representative George Miller (D-Calif.), a powerful ally of House Speaker Nancy Pelosi (D-Calif.). And this week Representative Jim McDermott (D-Wash.), a member of the tax-writing Ways and Means Committee, introduced a companion version to Frank's IGREA that seeks to legalise, regulate and tax some forms of Internet gambling.

He has argued the move would create a financial windfall for the federal government.

The Frank hearing comes as federal regulators struggle to decipher the law for banks and other financial institutions required to block this flow of money to foreign gambling sites. The Department of the Treasury and the Federal Reserve issued guidelines last fall that were intended to clarify what types of transactions banks, credit card companies and other institutions should block.

But many of those financial services companies, in conjunction with gamblers, lawmakers and a broad cross section of trade associations affected by the law, have since flooded the Treasury and the Federal Reserve with protest letters, arguing the clarification itself was too vague.

In letters to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, a group of congressional Republicans argued that banks will choose to block every transaction that might be interpreted as gambling, whether it is legal or not, if these regulators do not do a better job of clarifying which transactions banks must block.

A coalition of gambling interests, financial institutions and outside trade groups has been working with backers of the original law to tweak the current rules, but most legislation on Capitol Hill remains stalled due to a lack of broad interest in the issue.

[silcnlayc]

New Internet Gambling Legislation Would Collect Billions in New Revenue


WASHINGTON, March 5 /PRNewswire-USNewswire/ -- Congressman Jim McDermott (D-WA) introduced yesterday the Internet Gambling Regulation and Tax Enforcement Act of 2008 that would ensure that taxes are collected on regulated Internet gambling activities. These revenues are estimated between $8.7 billion and $42.8 billion over ten years, according to a recent tax revenue analysis prepared by PricewaterhouseCoopers.


"To be clear, these are not mostly new taxes -- the bulk of the revenues generated would come from taxes required under existing law," said Representative McDermott in a letter circulated last year to all members of Congress. "This is simply a framework to collect taxes on existing activity that is currently unregulated, unsupervised, and underground."


The legislation strengthens provisions in an earlier version of the bill introduced last year, and includes an enhanced reporting mechanism under which licensed gambling operators are required to provide each customer an annual statement of winnings and losses. It also establishes a two percent licensing fee that is paid by the operator, not the individual gambler. The licensing fee is designed to equalize the costs of operation in providing gambling services online, as opposed to brick-and-mortar casinos providing gambling services in-person, and would only be applied to online operators.


"Before us is a tremendous opportunity to protect consumers and recoup billions of dollars that should be collected by the Internal Revenue Service," said McDermott. "These are revenues that are desperately needed, given that we are at war and face difficulty financing the nation's priorities."


McDermott's legislation functions as a companion bill to the Internet Gambling Regulation and Enforcement Act (H.R. 2046), legislation introduced by Representative Barney Frank (D-MA) that would regulate Internet gambling in the U.S. Under the Frank legislation, each Internet gambling operator would be licensed by the Financial Crimes Enforcement Network (FinCEN) and be required to ensure that the individual placing the bet or wager is physically located in a jurisdiction that permits a particular form of Internet gambling. The legislation would also reinforce the rights of States to control what, if any, level of Internet gambling is permissible within their borders, including the ability to apply additional taxes, and to ensure that appropriate consumer protections and limitations were in place.


"By not regulating and taxing Internet gambling, theUnited States is forfeiting billions of dollars in revenue needed for critical government programs," said Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative. "It is time for Congress to address this issue and put in place security controls to protect the millions of Americans that continue to gamble online despite the prohibition."


About Safe and Secure Internet Gambling Initiative

The Safe and Secure Internet Gambling Initiative promotes the freedom of individuals to gamble online with the proper safeguards to protect consumers and ensure the integrity of financial transactions. For more information on the Initiative, please visit www.safeandsecureig.org. The Web site provides a means by which individuals can register support for regulated Internet gambling with their elected representatives.



http://newsblaze.com/story/200803050...-Columbia.html


SOURCE Safe and Secure Internet Gambling Initiative

[jetset]

Excellent article on objections to UIGEA here:

http://www.pokernews.com/news/2008/0...egulations.htm

[jetset]

UIGEA UNDER INVESTIGATION BY E.U.

European trade bloc acts on complaints regarding US online gambling laws

Online gambling companies in the 27 nation European Union trade alliance had the satisfaction this week of seeing their calls for an investigation into US online gambling legislation answered. The EU launched an investigation into possible infringment of world trade rules.

The compliance arm of the Union, the European Commission, said it would look into the complaints over the next five to seven months.

The investigation could result in the EU filing a complaint at the World Trade Organisation in the latest international tussle over a growing business worth more than US$15.5 billion a year, reports Reuters.

"The U.S. has the right to address legitimate public policy concerns relating to Internet gambling, but discrimination against EU companies cannot be part of the policy mix," said EU Trade Commissioner Peter Mandelson. He said he hoped the issue could be resolved amicably. Mandelson held talks with US officials late last year, producing some WTO concessions which were badly received by online gambling companies badly hit by unilateral American financial bans.

The companies complain that, before the ban, they had the right to operate under international trade laws, and that therefore ongoing U.S. Justice Department investigations into their previous activities in the U.S. violate WTO rules.

European companies claim the ban forced them out of the lucrative American market and discriminates against them in violation of WTO rules, while permitting domestic gambling companies, particularly those offering betting on horse races, lotteries and fantasy games, to flourish.

In 2006, the WTO had ruled against a U.S. ban that stops American banks and credit card companies from processing payments to online gambling businesses outside the country. The 2006 WTO ruling found the U.S. had the right to prevent offshore betting as a means of protecting public order and public morals. But it said Washington was breaking trade law by targeting online gambling without equal application of the rules to American operators offering remote betting on horse and dog racing (see previous InfoPowa reports).

Washington responded by doing a deal with the EU, Japan, Canada and others in December to allow it to effectively opt out of WTO rules on gambling in return for offering compensation in other areas.

The Remote Gambling Association, which represents a number of major European gambling companies, says the U.S. action is hurting their revenues and stock value as well as making them run the risk of substantial fines. It welcomed the EU's decision to act on its complaint.

"We cannot simply sit on the sidelines and watch while our members, who are already badly bruised by unlawful U.S. acts, suffer the double whammy of being prosecuted for activities whilst U.S. industry is not," said Clive Hawkswood, chief executive of the London-based RGA.

"By any analysis, the U.S. policy is fundamentally unfair, and we are delighted that the commission shares our concern. The U.S. simply needs to end its discriminatory prosecution of EU companies, and their shareholders, who have after all been out of the US market for almost two years now."

In December, the WTO awarded Antigua and Barbuda the right to impose $21 million a year in sanctions on the United States in retaliation for the restrictions on online betting, but the sum was a fraction of the $3.4 billion sought by the Caribbean nation.

A U.S. Justice Department spokesman said they had no immediate comment, but U.S. trade officials said they had been assured by EU officials the investigation would not upset the compensation package the two sides struck in December 2007.

[jetset]

PLENTY OF U.S. POLITICAL ACTION AHEAD

Las Vegas Review-Journal summarises attempts to bring online gambling into the light

The Las Vegas Review-Journal has published a useful article on US legislative moves aimed at easing the ban on internet gambling, starting with plans next month for a House of Representatives panel to review regulations proposed by the Department of Treasury to enforce UIGEA (see previous InfoPowa reports).

The hearing by the House Financial Services Committee could occur as early as April 2, the Journal reveals, commenting that the draft regulations published October 4 have been the subject of over 200 submissions from interested parties. Many of the comments question whether the regulations would be effective.

The Journal quotes Congressman Barney Frank, chairman of the committee, who said: "The hearing is going to show - I want to show - that it's not that the regulations weren't done well. It's that they can't be done well given the inherent nature of the issue."

About 23 million people gambled on the Internet in 2005 on 2 500 Web sites. About 8 million of those gamblers were from the United States. So far, a bill proposed by Frank to legalise online gambling has 46 co-sponsors - 42 Democrats and four Republicans.

The man who pushed the UIGEA through Congress in 2006, now-retired politician Bill Frist repeatedly declined to comment when approached by the LVRJ. Frist, a Republican from Tennessee, attached the notorious Unlawful Internet Gambling Enforcement Act to an unrelated port security bill as Congress rushed to finish business.

The chairman of the Poker Players Alliance, former Senator Alfonse D'Amato, said this week that he does not expect Congress to overturn the Internet gambling ban this year. "It's going to take a couple of years," said D'Amato, noting the increased difficulty of passing legislation in a presidential election year.

Although he declined to disclose names, D'Amato said he is talking to Republican senators in hopes of finding one who will lead efforts in the Senate to exempt poker from the online wagering ban. The legislation in the Senate would be similar to a bill proposed last year in the House by Representative Bob Wexler, a Florida Democrat. Wexler's bill has 21 co-sponsors - 17 Democrats and four Republicans.

A bill by Nevada Representative Shelley Berkley calling for a one-year study of Internet gambling by the National Research Council of the National Academy of Sciences has 68 co-sponsors - 64 Democrats and four Republicans, including Representatives Jon Porter and Dean Heller, both Nevada Republicans.

And Representative James McDermott, a Democrat from Washington, has proposed legislation to tax Internet gambling for up to $43 billion over 10 years. McDermott's bill, which is intended to complement Frank's bill, has 21 co-sponsors - 17 Democrats and four Republicans.

[Mousey]

Christian Science Monitor call for tougher online gambling laws.

from the March 25, 2008 edition
Don't fold on Internet gambling ban

A 2006 US law has cut Web-based betting. If anything, the law needs to be toughened.

Last year, the percentage of American college students who gamble online fell to 1.5 percent from 5.8 percent the year before. The reason? A 2006 federal law restricting Internet gambling. Now some in Congress who want to tax this type of addictive betting plan to roll back that progress.

Rep. Barney Frank (D) of Massachusetts is expected to hold congressional hearings next month to explore overturning the 2006 Unlawful Internet Gambling Enforcement Act and replace it with legalized online betting, which in turn could generate taxes and fees to the tune of billions of dollars. His bill to legalize online gambling has so far found more than 40 cosponsors.

Not included in the cost of this revenue stream, of course, would be the social price paid from ....