If the bank determines that a new business customer does operate an Internet Gambling Business, how are banks planning on handling this? We are a small town rural bank...so I highly doubt we will see this type of operation with our customers, but according to the new rules we have to have procedures in place indicating how we will handle this. Are some banks just not going to open the account? Just curious as to what procedures other small community banks plan to implement to meet this requirement. Thanks.

Option 1 is that you simply decline to open the account without any attempt to determine the legality of the customer's operations. You have that right. Precedents exist in the fact that same banks will not provide services to MSBs and cannabis dispensaries regardless of their ability to demonstrate compliance with the law. (My opinion is this is what most community financial institutions will do.)

Option 2 is that you would only open the account for an entity of state government involved in Internet gambling. (The largest promoters of gambling in the U.S. are state governments.)

Option 3 is that you would open an account for a customer involved in Internet gambling if the customer could document the legality of that involvement. Interestingly, the regulation lists the documentation requirements necessary to meet this burden. Accordingly, that list would represent your minimum requirements.

As a practical observation, the bank's choice of a particular option would be reflected in its policy and its due diligence procedures.

Thanks Ken, I appreciate the feedback. I do have one more question...how do you expect most banks to respond when the bank becomes aware of a restricted transaction? Deny the commercial customer access to a particular payment system or close the account entirely? What other options do we have? Thanks.

We are also a small community bank and we have chosen not to open the account if we determine that the entity operates and Internet gambling business - regardless of whether it is legally licensed to do so or not.

We will also be automatically closing the accounts/relationship if we are notified of restricted transactions. Given our marketplace, I don't ever expect to run into opening an account for a gambling business or getting notification of prohibited transactions.

You would file a SAR if the SAR filing rules required it; i.e. do you have a suspect (yes) and the amount involved.

You are not required by Reg GG or BSA to close the offending account, but your procedures should say what you would do and closure is an option. The procedures that I have seen favor investigation and contacting the customer with closure as the expected result if those diplomatic efforts do not work out.

As Auditor K notes, if you think ever having a hit is unlikely, then closure becomes the easiest choice.

When a new applicant for a deposit account responds yes to the following question: Is your organization in any way involved in internet gambling activities? Then the new accounts clerk will refer the account to the Senior Operations Officer and he and the Senior Compliance Officer and BSA officer will discuss the options for the account. Then we will not allow the account to open. Long winded response but our policy states that there are other options should they respond yes to the question.