The end of summer is upon us. Labor Day is just around the corner, women will stop wearing pure white and switch to winter white, children will go back to school and Congress will be back in session. Before congress took their break the House of Representatives passed H.R. 4411 on July 13th, an anti-internet bill titled "To prevent the use of certain payment instruments, credit cards, and fund transfers for unlawful Internet gambling, and for other purposes." The Republican state Representative for Iowa, Jim Leach was hoping that the bill would be on the Senate roster before they took their break for August. Much to the relief the internet gambling industry, it was not.

Internet gambling is considered to be technically legal for US residents. The 1961 Wire Act makes all betting transactions over phone lines clearly illegal. However, the internet wasn't created until after the Wire Act was written. As such making a deposit into an online poker room, casino, or sports book is legal from the United States while owning and operating an internet casino from the US is not. The recent arrest of David Carruthers, the now ex-CEO of Betonsports (an internet sports book) is due to the fact that his company allowed for bets to be placed via phone.

The last major action for H. R. 4411 was "Placed on Senate Legislative Calendar under General Orders." Which means it is awaiting review in the Senate. The bill has been added to the "American Values Agenda", a group of bills promoting conservative values such as protecting the pledge of allegiance, making the definition of marriage to be between a man and a woman, and making an abortion more difficult to receive.

I still haven't figured out how internet poker rooms, casinos, and sports books are against American Values while internet lotteries and horse racing are ok. Yes, internet lotteries and horse racing are protected from H. R. 4411 due to their powerful lobbyists and the money that they bring in via taxes and revenue to the states.

The internet gambling industry has an unlikely ally in the desire to see this bill squashed into oblivion. The Independent Community Bankers of America, the largest constituency of community banks of all sizes and charter types in the nation, is against H.R. 4411 as it would require financial institutions to block payments between U.S. residents and internet gambling establishments. Their reasoning is simple. It has nothing to do with their opinion on internet gambling and everything to do with logistics. In their opinion the ban would be nearly impossible to enforce with the way transactions are currently processed.

"It's very tempting to think the banking industry can stop this kind of stuff because people pay for it through banks, but the fact is the system just wasn't really designed to do it," says Steve Verdier, a lobbyist for the ICBA, based in Washington.

The problem is the way electronic transfers are made. Credit card payments have a code for each type of business on the receiving end of the transaction. Ban the code, and you ban the business, which is extremely simple. This is why most credit card companies have already banned deposits into online gambling establishments without being asked by Congress. Electronic transfers, however, have no codes currently. This means your bank reads your direct deposit, automatic phone payment, and your internet casino deposit in the same way.

Changing the system sounds like a straightforward answer, but it isn't. Updating the system would involve an expensive and immense overhaul to permit banks to recognize transactions with internet casinos amongst the barrage of other electronic payments that they handle each day. This overhaul of the electronic deposit system wouldn't even cover the physical checks used to deposit into online casinos nor would it block the bank drafts given to players for winning. H.R. 4411 would require that these be blocked as well, and the banks have no system in place which would allow that to happen.

With all of the changes requested in H.R. 4411 it forgets to mention third party payment companies, such as Neteller or FirePay. The law would keep it legal to deposit into an off-shore third party company which would then deposit into the online gambling establishment. One theory is that while they have may not been mentioned they have not been forgotten and would be included after the fact by being informed that their service is aiding and abetting violations of the new law. This would allow the Department of Justice to seize all of the companies US assets, if they have any.

Laura Fisher is a spokeswoman for The American Bankers Association, a group which represents US's largest banks such as Bank of America and Wells Fargo. The group has been relatively quiet regarding H.R. 4411, but that doesn't mean that they would be happy if it passed. "You are talking about manually checking 40 billion checks a year for the payee and making an assessment of whether it's for an Internet gambling site or restaurant," she says. Even the U.S. Chamber of Commerce has commented on the issue, expressing concern that Congress is deputizing banks "to enforce social policy."

Ellen Zimiles, chief executive of New York-based Daylight Forensic & Advisory, advises banks on regulatory compliance and she believes that, "this would be a huge blow" to the banking industry. "It would be extremely challenging, and it would take their efforts away from all the other things they're trying to do right now," she adds. One of those things they are trying to do is help authorities find terrorist financing. Do US citizens really want the banks to reallocate their resources to internet gambling instead?

Imagine the time and people-power required to do such a task. As it is banks find it nearly impossible to identify electronic transfers connecting to people or groups that are on government lists of acknowledged drug dealers and terrorists. In addition to the system overhaul previously mentioned banks would require constant updated lists of all known internet gambling establishments names. According to Zimiles, "If they're not given exact names to look for, it's a needle in a haystack."

Personally I would rather have the United States Department of Justice focus their energies on fighting terrorism and drug dealers rather than forcing banks to help the US become a nanny state.

Posted on: August 30, 2006

Add This Gambling Article To:
Del.icio.us	Digg	Google	Spurl
Furl	Simpy	Y! MyWeb

Back to August 2006's archive
Back to latest Articles