Editorial

Monday, 14 September 2009 00:32

Ever since the infamous UIGEA was introduced in 2006 to effectively ban gambling in online casinos and poker rooms by US players, the banks have been preparing for the set date when they will have to legally comply with the regulations set out by the act.

1st December 2009 is that date and with very little time left before it arrives, US banks are making their final adjustments to ensure they will be acting completely within the law. So how exactly are the banks gearing up for this date and why has it taken until now for the final pieces of this complex puzzle to fall into place?

When the UIGEA (Unlawful Internet Gambling Enforcement Act) was effectively pushed through Congress back in 2006 as a carefully crafted addendum to a largely unrelated Act called the SAFE Port Act and signed into law by the then President George W Bush, the actual regulations had not even been drafted. It wasn't until over two years later, in November 2008, the bill was finally approved. This meant that the mandatory sixty day review period for the Act could be completed prior to President Bush leaving office. It also established the date for all banks to be legally obligated for compliance with the Act's regulations as December 1, 2009.

There have since been great hopes that with the new incoming President and Rep. Barney Frank's bill to overturn the UIGEA, the law would have been changed in time to prevent the changes coming into force. Sadly, Frank's bill has taken far longer to gain the necessary momentum to get it through Congress than expected.

So what are the banks set up for and how will they monitor accounts for possible infractions by customers who may be using online gambling sites?

According to American Bankers Association vice president Steve Kenneally, the banks are not directly responsible for the monitoring of transactions occurring in individual accounts. They are however responsible for the monitoring of debit and credit card transactions and blocking anything that may be construed as the funding of lawful and also unlawful wagering. This will have to happen as the banks will find it virtually impossible to differentiate between what is legal and what is illegal gambling.

There is really no way that the debit and credit card networks or banks, can differentiate between lawful and unlawful transactions when 10,000 requests per minute come flying through a computer network. With around ninety billion payments made in 2007, that's an enormous and virtually impossible number of transactions to sift through.

To make matters even more complex, while the Dept of Justice claims that all forms of online gambling are illegal, it seems that most lawyers and just about all poker industry entities are of the belief that the Department actually does not have a federal law to stand on in order to stand in that position. It is a fact that no individual person to date has ever been formerly charged by any law enforcement agency for playing poker online. Additionally, the Third Circuit Court of Appeals has made it quite clear that there is nothing in the UIGEA that makes any form of gambling illegal.

It is expected then that banks will simply ban all debit and credit card transactions that are from companies coded as engaging in "online wagering" disregarding whether they are actually illegal or legal. At present, most banks are generally doing this now. The way that it works is that every merchant, be they stores, airports or gas stations, that are able to accept a credit or debit card, has a specific code assigned to them. If that code matches that of "online wagering" then it is expected that banks will refuse to process the transaction after December 1 in order to play safe.

While there is no onus on banks to retroactively question existing account holding companies, the regulations will obligate them to ask specifically of any new company who creates a bank account if they are involved in any way with online gambling. Giving a false answer at this point may constitute bank fraud. In this way, the creators of the regulations have shifted the emphasis onto the process of new account opening.

How will this affect online poker players?

Poker players will continue to play where it suits them as they are not actually breaking any laws themselves, although they may find that deposits and withdrawals take a little longer. People will simply come up with alternative funding methods to get round the tougher restrictions on US banks, such as offshore accounts and funding.

As for the huge loss of potential revenue that is continuing to drain away to offshore accounts, it’s really just a matter of time before the individual States start to get hungry for their cut of such a booming revenue stream. Then there will be some serious momentum given to Frank's bill and all the established offshore companies are waiting in line like Olympic sprinters ready to jump the second the starting gun fires.