Some members of Congress think that the solution to the Internet gambling “problem”is to pass enforcement of a ban onto banks. The banks, understandably, have a different take. From the WSJ:
A group representing 5,000 small banks is opposing a tool lawmakers hope to use to stop illegal online gambling, posing a challenge to what is widely seen as the government’s best shot at cracking down on the activity.
The Independent Community Bankers of America, whose members range from New York’s Metropolitan National Bank to Colorado’s First National Bank of Las Animas, is objecting to a proposal winding its way through Congress that would require financial institutions to block payments between U.S. residents and online casinos. The group fears enforcement would be burdensome – if not impossible – given the way the transactions are processed.
At issue are the electronic transfers that many gamblers use to move money between their bank accounts and offshore casinos. Such transfers, which often go through a third-party payment company, are the lifeblood of the online gambling industry. (Another aspect of the legislation, which the banking group doesn’t oppose, would formalize a ban on using credit cards to fund accounts. Many banks began voluntarily blocking such transactions five years ago, at the request of regulators.)
“It’s very tempting to think the banking industry can stop this kind of stuff because people pay for it through banks, but the fact is the system just wasn’t really designed to do it,” says Steve Verdier, a lobbyist for the ICBA, based in Washington. The group is asking the Senate, which will return from recess next week, to revise a House of Representatives version of the bill that passed in July.
The group says that, unlike credit-card payments, the electronic transfers aren’t coded to show what type of business is on the receiving end. They argue the existing system used to process such payments would require a massive – and costly – overhaul to allow banks to identify transactions with online casinos amid the flood of other electronic payments that banks handle each day. The system used by the casinos is the same one used for a multitude of transactions, including direct deposits of paychecks and automated payments to utility companies.
What’s more, some gamblers use physical checks to move money into gambling accounts or receive winnings. The proposed law could require banks to block those transactions, too, though banks say they have no system in place to do so.
Lawmakers have been debating for years about how to rein in offshore Internet casinos, which generated about $12 billion in revenue last year, with about half coming from Americans, according to gambling-industry research firm Christiansen Capital Advisors. Those efforts have gained momentum in recent months. In July, federal authorities arrested the chief executive of Costa Rica-based BetOnSports Plc as he changed planes in Texas during an international flight, and charged him and 10 others involved with the company with racketeering and fraud for taking bets from Americans.
The Justice Department contends the 1961 Wire Act and other federal laws make it illegal for businesses to take bets over the Web from U.S. residents. Previous congressional efforts to pass an explicit ban of online gambling have stalled, in part, because of questions about enforcement. The new measure gained steam this year, in part, as Republicans sought to distance themselves from the scandal surrounding Jack Abramoff, the lobbyist who helped kill an Internet gambling ban in 2000.
“It’s the only approach I know of that has a hope of making a significant dent in Internet gambling,” Rep. Jim Leach (R., Iowa), co-sponsor of the proposed Internet Gambling Prohibition and Enforcement Act, says of the effort to block money transfers. He acknowledges that the law would require greater regulation of the banking industry, but points to a provision that directs the Federal Reserve and the Treasury to come up with an implementation plan that wouldn’t be overly burdensome for banks.
WSJ.com – Banks Balk at Congressional Plan To Cut Off Cash From Net Casinos
If you have read Cutting the Wire, you’ll anticipate what I’m going to say next: this is history repeating itself, except that this time it’s banks, not communications companies, who are balking at policing the wires. I talk about this in chapter three, “Camleot Strikes Back.” Anyway, it just seems to me that this battle has already been fought–and lost. If the act of placing a bet is not criminal, it is very difficult to enforce a prohibition against gambling, or to effectively outlaw the business of gambling.