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New Codes in Hand, Some Banks Take Second Look at Online Gaming
By Colby Adams
printThe introduction of new merchant codes to identify legal online wagers has spurred a handful of U.S. banks to reconsider the compliance risks of processing payments for the online gaming industry, according to sources. Citing ambiguities in federal rules and an inability to distinguish legal from illegal online wagers, U.S. financial institutions for several years have avoided processing credit and debit card transactions linked to any form of online gaming, including bets made in Nevada, New Jersey, and Delaware, where the activity is legal. In April, MasterCard, Visa, American Express and Discover launched three new merchant codes that specifically identify...
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A U.S. Justice Department memorandum clearing the way for online gaming may exacerbate compliance woes for banks operating under a 2006 anti-gambling law, say attorneys and industry groups.
As some states inch toward legalizing online gambling, they are unlikely to get much cooperation from financial institutions concerned that they'll be held liable for processing even legal bets, say analysts.
Undercover investigators, acting as a phony payment processor, used U.S. bank accounts to see how offshore gambling operations transacted more than $30 million with their American clients, according to federal prosecutors.
The U.S. Justice Department is seeking $3 billion in forfeitures and fines from three of the largest online gambling businesses and the financial institutions and individuals that helped to process bets.
U.S. banks are still fine tuning policies on when to report suspicious activity and reject transactions tied to online gambling after the passing of a June 1 enforcement deadline.
An online gambling ban that requires banks to monitor for illegal transactions is unlikely to be overturned before a June 1 enforcement deadline, despite congressional efforts to repeal the law.
U.S. Justice Department cases tied to a controversial ban on online gambling will likely complicate congressional efforts to overturn the law before a June enforcement deadline, say government officials and consultants.
Partisan bickering and a backlog of legislation are stymieing congressional attempts to overturn a controversial ban on online gambling before a June enforcement deadline, according to analysts.
The federal ban on processing transactions tied to Internet gambling will likely be overturned at some point, but lawmakers have yet to address how to best mitigate related money laundering risks, according to a former IRS agent who recently testified before U.S. lawmakers.
Proposed federal banking regulations targeting online gambling will force banks and other financial institutions to rethink their customer due diligence procedures, AML consultants say
The United States should consider strictly controlling, rather than banning, betting over the Internet, as is done in the United Kingdom, gambling experts and some lawmakers say.
Federal law prohibits banks and other financial institutions from "knowingly" accepting funds from Internet gambling operations. But the law is not clear about what constitutes knowingly accepting funds, observers say.
In testimony before the House Financial Services Committee, online payment processors, data security professionals and other experts called for the licensing of Internet gambling businesses but could not agree on whether current technology can successfully verify the identities of online bettors.