Adoption on the rules of the online gabling legislation could inflict burden on banks
According to a report in the London Financial Times of Tuesday last week, the banking sector has warned the US Treasury that regulations proposed for the online gambling ban will be impossible to comply unless the Bush administration clarifies conflicting views on the online gambling bill.
The Financial Services Roundtable, which represents dozens of banks and other financial services firms, said it was “very concerned” that adoption of the rules could impose “significant” and costly compliance burdens on banks.
“The statute and the proposed rule expand the role of financial institutions to police laws that are more appropriate for law enforcement agencies,” the Roundtable said in public filings to the Treasury and Federal Reserve.
The criticism raises new questions about whether regulators will be able to enforce a law that, in effect, requires banks and other institutions to know the purpose and legality of payments in an industry – online gambling – in which federal and state rules often conflict. To make matters worse, the one-year old law allows for some form of online gambling like horse betting, which will make it nearly impossible for banks to differentiate between the “good” web betting horse racing and the “bad” web betting online poker.
At the centre of concerns raised by the Financial Services Roundtable is the fact that it is far from clear whether banks would also have to block payments from US-based gambling sites, including websites that take bets on horses.
The justice department has long held the view that online interstate betting within the US on horses is illegal. However, the handful of established horse betting sites have never been prosecuted. The horse-betting industry maintains that state laws allowing wagers on horses trump federal laws. Legislators left the issue alone last year by including language in the anti-gambling legislation that said it did not apply to wagers on horses.
The proposed rules would require US financial companies with designated payments systems to have policies and procedures that are “reasonably designed” to prevent payments being made to illegal gambling businesses. But that cost money – to the tune of billions of dollars, according to the banking sector. Already, use of checks have been ruled out after a determination that such monitoring would be impossible at this juncture in time.
In comments about the proposed rules, Bank of America said the US should provide a list of entities with whom banks are forbidden to take payments in the absence of an “unambiguous” definition of what is legal. The problem with such a list is that most online gambling establishments do not engage in banking using their website name for example, Full Tilt Poker would not be listed as the recipient or the authorized agent making payment to customers.
