News

Thursday, 23 September 2010 08:44

An Arizona bank has run afoul of federal laws concerning online gambling funds transactions and must now forfeit the proceeds following an FBI investigation.

Goldwater Bank, based in Scottsdale, Arizona will have to forfeit almost $734,000 that it received in revenue for transacting illegal Internet gambling and other operations such as money laundering. This single branch bank decided to agree to the funds forfeiture in order that claims into their origin are resolved.

The problems came to light following an investigation into their actions after they received funding from the Troubled Asset Relief Program (TARP) along with several other small Arizona-based banks. The investigation was mounted by a concerted effort by the FBI, officials from TARP and the Southern District of New York United States Attorney's Office.

In a similar situation to other small banks based in Arizona, Goldwater was experiencing financial troubles brought about by a combination of the general soft economy and the downturn in the real estate market in Arizona. Reporting a $803,000 loss for 2Q 2010, the bank has been running at a loss for the majority of its existence since it was founded in 2007. With a midyear deposits listing of $174 million, the bank has managed only a 0.2 percent state-wide market share.

It transpired that early in 2009, Goldwater received deposits of over $13.3 million from the account holder Allied Wallet Inc. A large proportion of those funds were traceable to the Isle of Man based online gambling company Pokerstars.com. According to federal officials, the funds originated from a variety of individuals and entities who were all engaged in online gambling. These funds were used in promoting the business, while attempts were made to conceal their origin.

Allied Wallet, meanwhile, had paid Goldwater Bank to process the transactions, which included payments made to and taken from Americans who were using gambling websites such as Pokerstars.com. In August, Ahmad Khawaja who owns Allied Wallet Inc. and another company agreed to the forfeiture of $13.3 million.

Preet Bharara, a Manhattan Attorney said that the forfeiture underscore the need for TARP recipient banks such as Goldwater should not be permitted to profit from criminal businesses.

Goldwater bank officials denied any knowledge that the nature of the transactions involved illegal gambling on the Internet. FBI assistant director Janice Fedarcyk said that despite Goldwater Bank's denial, it was still paid to execute the financial transactions that facilitated the criminal operation. As such it has been penalized accordingly.