Opening the account would trigger a significant level of ongoing due diligence under UIEGA. However, regardless of UIGEA, the DOJ says Internet gambling violates the Wire Act and is simply illegal. That was the basis for their seizing several million dollars, some of it in consumer bank accounts, several weeks ago. While their argument is thin to say the least, I really do not care to meet any of their representatives in a business context.

Does anyone really think they are going to tell us they engage in internet gambling? As a previous poster above said, they do 'payroll' or some other vague business. It will be up to us to 'ferret' them out and close them out.

Therein lies the tale. UIGEA does not require any ferreting.

It requires the adoption of of a policy. It requires some due diligence at the inception of commercial accounts, but that can be satisfied by a customer certification. It also requires the development of a contingency plan for what you are going to do if you realize the customer fibbed or added a new line of business later. It does not require you to monitor commercial customer activity.

Analogize it to IRS TIN compliance. You are required to get the customer to certify the TIN. You are not required to investigate to be certain the TIN is his. However, if you are notified that the TIN is incorrect (B Notice) there are some things you have to do.

Unless some regulatory loon classifies UIGEA as a safety & soundness topic, examiners will not be empowered to send you on a search and destroy mission. (I'll be a bit more confident about their comprehension of that fact when I see the exam procedures.)

The real problem here is the DOJ. If the nation's top law enforcement agency says something is illegal, then it is (no matter how tortured their interpretation may be). They say Internet gambling is illegal right now. If it's illegal, then it's subject to SAR filing rules and banks should attempt to detect it, report it as required, and weed it out. That applies to consumer activity too and that will not change unless Congress actually legalizes Internet gambling.

A compliance plan based on UIEGA's repeal or even the delay of its mandatory compliance date (more likely) isn't a plan. On the other hand, it's primarily checklist compliance and should be relatively easy to put together, as long as banks do not wait until the night before.

Where do they state that it is illegal? I thought that this was a state issue.

Go to the DOJ web site and search on "internet gambling." You will get lots of hits. The first one listed when I did it this morning was a $105 million forfeiture in April.

As an aside, if it violates state law it also violates federal law, but that is not the basis of DOJ's actions.

We have decided that we will not knowingly open an account for a company engaged in Internet gambling. I'm wondering if the BSA Program would be an appropriate place to address this (and the corresponding procedures), i.e., include Internet gambling as a "high-risk business." Would an Internet gambling business fall under the definition of a nonbank financial institution? I'm just trying to get this into the right slot. We're also going to address it in our Electronic Banking Policy, but that's for another day.

Funny you should mention that. See
http://www.usdoj.gov/usao/nys/pressreleases/August09/rennickdouglasindictmentpr.pdf

Ken, I was looking for verification where it states that it is illegal for a customer to be performing internet gambling transactions through their accounts. I read a posting about filing SAR's on customers that do this but compliance wants to see proof that the DOJ has declared internet gambling as an illegal activity when performed by a consumer. Can you please help?? Thank you!!

This is from a DOJ press release:

…the Acting United States Attorney for the Southern District of New York, announced today that the United States Attorney's Office for the Southern District of NewYork (the "Office") has entered into a Non-Prosecution Agreement with Party Gaming PLC ("Party Gaming"), an Internet gambling company incorporated in Gibraltar and publicly traded on the London Stock Exchange under the ticker symbol PRTY. As part of the Non-Prosecution Agreement, Party Gaming agreed to forfeit a total of $105 million, representing proceeds of Party Gaming's U.S. Internet gambling operations, to be paid over a period of three years.

Party Gaming offers a variety of web-based real-money and free-play games including, for example, real-money poker and casino gambling. However, Internet real-money gambling is not legal in the U.S.(Emphasis supplied)

If they say it's "not legal" I'm willing to conclude that it's not legal no matter who does it.

Perfect, thank you!!

Here's a well written, well thought out opinion piece that explains why DOJ didn't really have the right to freeze about $34 million in winnings from online poker playing consumers in June. Perhaps the author is right, dunno.

Nevertheless, from a bank's point of view, the only opinion that matters is that of the DOJ.

For banks that would prefer to ignore consumer gambling by saying it is not prohibited by law, the difficult task will be how to simultaneously ignore the fact that company through whom the consumer is placing bets is clearly violating the law. Perhaps the distinction only affects who is listed on the SAR as the suspect.

Can someone explain how we are to monitor incoming ACH credit transactions for this? How would we know if a customer was receiving payment via ACH from an internet gambling site? Or maybe I'm intrepeting our requirements incorrectly...

I can not remember where I found this, but here is a notification letter sample.


[Date]
[Name of foreign sender or foreign banking office]
[Address]

Re: U.S. Unlawful Internet Gambling Enforcement Act Notice

Dear [Name of foreign counterparty]:

On [date], U.S. government officials informed us that your institution processed payments through our facilities for Internet gambling transactions restricted by U.S. law on [dates, recipients, and other relevant information if available].

We provide this notice to comply with U.S. Government regulations implementing the Unlawful Internet Gambling Enforcement Act of 2006 (Act), a U.S. federal law. Our policies and procedures established in accordance with those regulations provide that we will notify a foreign counterparty if we learn that the counterparty has processed payments through our facilities for Internet gambling transactions restricted by the Act. This notice ensures that you are aware that we have received information that your institution has processed payments for Internet gambling restricted by the Act.

The Act is codified in subchapter IV, chapter 53, title 31 of the U.S. Code (31 U.S.C. 5361 et seq.). Implementing regulations that duplicate one another can be found at part 233 of title 12 of the U.S. Code of Federal Regulations (12 CFR part 233) and part 132 of title 31 of the U.S. Code of Federal Regulations (31 CFR part 132).

Thanks for the info!

The notice is a model form contained in Regulation GG; it has no bearing on domestic transactions.

UIGEA does not require you to monitor anything. It indulges in the fiction that by obtaining customer certifications and providing customer notices you have prohibited the transactions from taking place.

This is one of those topics where training is important to make certain you do not do a lot of junk that no one asked you to do. John is going to do a BOL webinar in the near future, but I cannot locate the date.

After working with the Reg. Z changes which required major brain cramp to figure out, it is difficult to stay high level and basic with this regulation...

Does anyone have a sample of the Commercial Customer Notice that will be sent out to all your commercial customers?

Thanks,
Lori

Thanks, Ken. October 7 is the tentative date.

Ditto Lori's request. Please.

We'll be using this

"In accordance with the requirements of the Unlawful Internet Gambling Enforcement Act of 2006 and Regulation GG, this notification is to inform you that restricted transactions are prohibited from being processed through your account or relationship with our institution. Restricted transactions are transactions in which a person accepts credit, funds, instruments or other proceeds from another person in connection with unlawful Internet gambling."

Has anyone received or tracked down a written notice from their designated payment system operator? This is one of the last pieces of the puzzle for me and I am not sure where to start...

I thought I read in one of the threads about this that someone had obtained notices from Visa and Mastercard. Is this who we should be looking to for these notices or is it a lower level operator? If it is Visa/MC has anyone tracked the notices down that would be willing to share where they found them?

We are currently discussing our procedures in the instance that we discover a commercial account is processing restricted transactions. We are thinking about sending a letter stating that we are aware of restricted transactions and if they continue we will have to close the account.
Then if it occurs again we will close the accout.
I have two questions...
Can we close the account if we KNOW that illegal transactions have occurred?
AND
Can we close it after the first occurance or should we send the letter and give them another chance.

Your deposit account agreement likely allows you to close any account if you choose to do so - and it should definitely allow you to close it if you're aware of illegal activity in the account.

Visa published an article summarizing their Operating Regulations and programs on Internet Gambling in the April 22, 2009 Visa Business News under Risk Management. It's the only statement that I have found so far. We don't support MasterCard.

I would be interested if anyone has found anything else.

How do I find the Visa Rules? I tried online but apparently didn't wade far enough to find it. Thanks