U.S. TREASURY UPDATES ON UIGEA REGS

16 November 2007

Exemptions generally extend to the gambler's bank


U.S. Treasury Deputy Assistant Secretary Valerie Abend outlined exemptions on the government's attempt to disrupt financial transactions with online gambling companies under the Unlawful Internet Gambling Enforcement Act today (Wednesday).

Giving an update on the much delayed regulations supporting the unpopular Act, Abend told Dow Jones that officials were still working to finalise a new rule that would put the onus on banks to help crack down on online gambling by U.S. citizens.

A public comment period on the proposed rule is scheduled to close December 12, and Abend said the U.S.Treasury is expecting a large number of responses and would have to provide analysis and reasons for any decisions based on the comments received.

In prepared remarks, Abend said banking regulators are focusing their efforts on banks that do business with gambling companies, as well as the interaction between U.S. banks and foreign banks that may be tied to online gambling.

Legislation passed by U.S. lawmakers last year required Treasury and the Federal Reserve to enact regulations aimed at preventing the flow of funds from gamblers to Internet gambling sites. The recent introduction of a proposal on the regulations was significantly over the 270 day deadline for this task imposed by Congress in October last year, and has been greeted with significant criticism.

Included in the [UIGEA] legislation are exemptions for certain financial institutions where it is "not reasonably practical" to prevent illegal internet gambling. Abend said such exemptions would generally extend to the gambler's bank, but not banks that do businesses with firms that offer illegal gambling.

"In the case of checks, the check collection system is highly automated and it is not reasonably practical for the gambler's bank to know whether a check presented to it for payment involves unlawful Internet gambling," Abend said.

Conversely, she said, a gambling business' bank or the first U.S. bank to receive a check under the proposed rule would be required to have policies and procedures in place to stop the processing of a check.

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