Today is the day that US credit processing companies must begin complying with the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). After regulatory wrangling, protests, and delays, the bill that was sneaked onto the books in the last hours (literally) of the Bush administration mandates that financial institutions have written rules in place to guarantee that they are not processing funds from “unlawful” Internet gambling activities. According to the language of the final rule for implementing the regulations, institutions must implement “policies and procedures that the Agencies deem to be reasonably designed to identify and block unlawful Internet gambling transactions.”
According to Professor I. Nelson Rose, noted legal scholar, the final rules practically nullified the original Act’s effect as a de facto ban on Internet wagering.
“The federal agencies still put the burden on the financial institutions to do “due diligence.” But what this means is banks have to do the same amount of “know your client” work with new commercial customers that they now do to prevent money laundering: basically ask the company owners what their business is and do a little checking to confirm they are telling the truth. If the new commercial customer proves it is not in the gambling business, there’s nothing more to do. If it is in the gambling business, the bank then has to ask it for its state license. The new rule says that getting a license is enough, because it is up to the states to regulate the Internet gambling operation of their licensees.”
Despite the apparent ease with which credit processing companies can circumvent the laws, some have already taken steps to comply with UIGEA by blocking all Internet gambling funds, presumably the intended desire of UIGEA’s creators. As a result, the gambling message boards are a’buzz, discussing alternative methods for depositing funds with online casino operators.
The ways for Internet gamblers to continue playing for real money remain numerous. The new laws do not apply to paper checks, wire transfers, foreign bank credit cards, or overseas payment processors. There are also new methods cropping up, perhaps in response to the new challenges online gamblers face. As I have discussed in the past, some of those methods carry risks. It is likely that, if UIGEA is not overturned, as more companies find ways around the new regulations those who have blocked transactions will change their minds.
Even if gamblers and banks can easily bypass the rules, the point remains that they shouldn’t have to feel like criminals while engaging in voluntary activities in the privacy of their own homes.