News
Justice Department Seeks $3 Billion from Online Gambling Companies that Used Complicit Banks
By Brian Monroe
printThe U.S. Justice Department is seeking $3 billion in forfeitures and fines from three of the largest online gambling businesses and the financial institutions and individuals that helped to process bets. The department's Southern District of New York disclosed indictments Friday against 11 individuals who allegedly operated or helped the three largest online gambling sites: PokerStars, Full Tilt Poker and Absolute Poker. Prosecutors, who successfully sought restraining orders against over 75 bank accounts, have charged the defendants with money laundering, bank fraud and illegal gambling. Because many U.S. financial institutions would not process bets or payouts for the offshore companies,...
TO READ THE FULL STORY
Related News
The introduction of new merchant codes to identify legal online wagers has spurred a handful of U.S. banks to reconsider the compliance risks of processing payments for the online gaming industry, according to sources.
In the wake of a Florida crackdown on cashless gambling operations, some large banks have begun reviewing their relationships with Internet sweepstakes parlors, say compliance officers.
Since the 2011 indictment by the U.S. Justice Department of some of the most prominent online gambling sites in the world, the financial risks posed by Internet betting have changed, believes Christine Duhaime, barrister and solicitor at Vancouver-based Duhaime Law.
Financial institutions may need to update anti-money laundering controls, due diligence and screening associated with their third-party payment processor customers, particularly those based internationally, according to U.S. Treasury guidance issued Monday.
Two of the world's largest online poker Web sites will forfeit $547 million to settle U.S. Justice Department allegations that they violated anti-gambling laws and deceived financial institutions into processing their payments.
The conviction of a payment processor accused of aiding Internet gambling companies highlights the compliance hurdles anti-money laundering officers face when maintaining accounts for merchant transactions, say bank and law enforcement officials.
A U.S. Justice Department memorandum clearing the way for online gaming may exacerbate compliance woes for banks operating under a 2006 anti-gambling law, say attorneys and industry groups.
U.S. banks are still fine tuning policies on when to report suspicious activity and reject transactions tied to online gambling after the passing of a June 1 enforcement deadline.
An online gambling ban that requires banks to monitor for illegal transactions is unlikely to be overturned before a June 1 enforcement deadline, despite congressional efforts to repeal the law.
Partisan bickering and a backlog of legislation are stymieing congressional attempts to overturn a controversial ban on online gambling before a June enforcement deadline, according to analysts.
The federal ban on processing transactions tied to Internet gambling will likely be overturned at some point, but lawmakers have yet to address how to best mitigate related money laundering risks, according to a former IRS agent who recently testified before U.S. lawmakers.
The United States has ordered four banks to freeze $33 million tied to companies that dole out winnings to online poker players, according to an Internet gambling advocacy group.
Canadian payments company ESI Entertainment Systems Inc. will forfeit $9 million in a deferred prosecution agreement with the U.S. Justice Department for its role in helping to launder proceeds from an illegal gambling operation.
The United States should consider strictly controlling, rather than banning, betting over the Internet, as is done in the United Kingdom, gambling experts and some lawmakers say.
Federal law prohibits banks and other financial institutions from "knowingly" accepting funds from Internet gambling operations. But the law is not clear about what constitutes knowingly accepting funds, observers say.
In testimony before the House Financial Services Committee, online payment processors, data security professionals and other experts called for the licensing of Internet gambling businesses but could not agree on whether current technology can successfully verify the identities of online bettors.
Citibank, the largest issuer of credit cards in the United States, will no longer allow the use of its Visa or MasterCard credit cards for online gambling transactions.