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.
Leaders of a senate panel Wednesday called for stronger oversight of online gaming to reverse the effects of a 2011 U.S. Justice Department memorandum that loosened restrictions on the industry.
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.
Proposed federal banking regulations targeting online gambling will force banks and other financial institutions to rethink their customer due diligence procedures, AML consultants say
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.