In a move engineered by Senate Majority Leader Bill Frist (R – Tenn.), the
United States Senate on Saturday passed legislation, by a voice vote, that
ostensibly would tighten security restrictions on cargo shipments from
overseas. But attached to the tail end of this bill was language from an
earlier House bill that was going nowhere since last July, which effectively
makes it illegal for a bank or other institution to transfer funds to
organizations that are involved in so-called “unlawful Internet gambling.”
Although the measure does not render Internet gambling in the U.S. unlawful,
it may as well have, since the new language makes it tremendously more
difficult, if not impossible, for banks to process online gambling
transactions even when they may be permitted. The bill whose language was
grafted onto the SAFE Ports Act, last known as the Unlawful Internet
Gambling and Prohibition Act, did spell out certain exceptions for legal
online gambling, including between states where gambling was legalized,
within individual states or tribal territories, as well as certain other
categories such as some horse racing wagers. Earlier, President Bush
indicated he would be willing to sign the gambling act into law, were he to
receive it on his desk. Instead, the President will find it tucked beneath
anti-terrorism and security legislation, which he also has indicated he
supports. “No person engaged in the business of betting or wagering,” reads
the language of the Act, “may knowingly accept, in connection with the
participation of another person in unlawful Internet gambling: credit…an
electronic funds transfer…any check [or] draft…[or] the proceeds of any
other form of financial transaction.”
Within a 270-day period, the Federal Reserve Board of Governors has been
instructed to work out a plan with financial institutions to implement an
electronic regulatory system that will block funds transfers that fall under
new federal restrictions.
The very notion that such a system will be created has resulted in the
shutdown, within hours, of U.S. branches of Internet gambling operations, a
great many of them based in the UK. The Times of London reported today that
PartyGaming, Sportingbet, World Gaming, and 888 Holdings are among the
British companies that saw giant chunks of their capital value erased from
the books: as much as 3 billion pounds ($5.66 billion USD) ceasing to exist,
and stock value plummeting as much as 75%.
PartyGaming today issued this statement: “After taking extensive legal
advice, the Board of PartyGaming Plc has concluded that the new legislation,
if signed into law, will make it practically impossible to provide US
residents with access to its real money poker and other real money gaming
sites. As a result of this development, the Board of PartyGaming has
determined that if the President signs the Act into law, the Company will
suspend all real money gaming business with US residents, and such
suspension will continue indefinitely, subject to clarification of the
interpretation and enforcement of US law and the impact on financial
institutions of this and other related legislation.” Free games access, and
gambling access to non-US customers, will remain unaffected.
In Montreal, Optimal Group, which co-owns an online payment processing
service, saw its share value plunge today a full 31%, to $8.08 CAN.
Sen. Frist was quoted over the weekend as saying, “Although we can’t monitor
every online gambler or regulate offshore gambling, we can police the
financial institutions that disregard our laws.”
A December 2002 Government Accounting Office report looked into the
possibility of whether Internet gambling operations could effectively be
used as fronts for money laundering. “Law enforcement officials…cited
several characteristics of Internet gambling that they believed made it
vulnerable to money laundering,” the report reads, “including the volume,
speed, and international reach of Internet transactions and the offshore
locations of Internet gambling sites. In their view, these characteristics
promoted a high level of anonymity and gave rise to complex jurisdictional
issues.” The report made no recommendations, but certainly raised the
specter of possible complicity.
