Prohibition on Payments to Internet Gambling Websites …

               Prohibition on Payments to Internet Gambling Websites
                                  Bill Summary

The "Unlawful Internet Gambling Enforcement Act of 2006" was part of H.R. 4954,
"The Safe Ports Act" passed by Congress in late September. The President is expected to
sign the bill.

Sponsored by Rep. Jim Leach (R-IA) and Senator Jon Kyle (R-AZ), the Internet
gambling legislation prohibits online casinos from accessing the payments system and
holds banks and credit card companies accountable for monitoring and blocking
payments to Internet gambling websites. Similar legislation is being considered to
control criminal behavior such as Internet child pornography and prescription drug sales.

These are the key details:

   ·   Prohibits gambling companies from accepting funds in connection with Internet
       gambling.
   ·   Applies to all forms of gambling on the Internet except for horseracing and where
       the activity occurs within a single state or within Indian lands.
   ·   The Treasury and Federal Reserve will jointly write regulations within 270 days
       of enactment spelling out policies and procedures financial institutions must
       follow. The agencies may exclude check and ACH payments on the grounds that
       it is not reasonably practical to track and block individual transactions.
   ·   Policies and procedures developed by the Treasury and Fed must attempt to avoid
       disrupting lawful Internet gambling transactions. It will be difficult to craft and
       comply with this requirement. Procedures would have to discern the difference
       between legal and illegal forms of Internet gambling, which may depend on the
       exact location of the individual gambler. This goes well beyond what banks are
       required to do to root out terrorist financing and money laundering. However,
       financial institutions are shielded from liability for inadvertently blocking legal
       transactions.
   ·   The law clearly states that the "business of betting or wagering" does not include
       the activities of a financial institution.
   ·   Financial institutions are given limited protection from court injunctions that
       would attempt to override the Treasury and Fed regulations. If this protection
       proves inadequate, the industry may be forced to ask for broader injunctive relief
       to maintain the workability of the payments system.
   ·   Authorizes state attorneys general to enforce the law against online casinos or
       payment processors.
   ·   Penalties include monetary fines and up to five years in prison.

                                                                            October 2006