I am in the process of auditing Regulation GG. I am aware that the bank does not need to monitor/block ACH, wire transfers and checks activity for unlawful activity, however for card systems we must have a code to block these type of transactions.
Are these codes required to be used each time a commercial customer requests a credit/debit card? I am having a debate with our credit card department as to whether the bank must first determine if we have onboarded an Internet Gambling customer before the codes are used (they have codes set up for this purpose).

You should be blocking merchant category code 7995 for all consumer and commercial cards on all your BINs if you are acting as a card issuer (or your processor is doing it for you in which case you would obtain an attestation from them that the rule is in place.)

Blocking on a card-by-card basis would be cumbersome and likely fraught with risks of human error.

Institutions offering merchant services such as acquiring credit and debit card transactions have a bit more due diligence requirement in that they should be verifying that none of their customers are accepting payments and funds for wagers on behalf of illegal internet gambling merchants.

Thank you Brian!

Doesn't 7995 also block "live" casino gambling which is legal?

It does. My suggestion for a rule to block unlawful internet gambling is to deny all card absent/card keyed international transactions for code 7995. This will allow in person casino and legal online lottery or horse racing betting that is domestic to go through.