A new advisory published by the law firm Alston & Bird LLP characterizes the recently proposed regulations that would implement the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) as adding more regulations to the payments industry without curtailing the ability of gamblers to illegally gamble online.
Entitled, "Proposed Internet Gambling Regulation Would Require New Policies and Procedures for the U.S. Payment System," the advisory warns that the proposed regulations require essentially all participants in the payments system "to impose effective controls on prohibited Internet gambling payments."
This applies to those participating in the automated clearing house (ACH) system and bankcard systems, including credit, debit and prepaid cards or stored-value cards, according to the advisory.
Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative, told The Green Sheet, "The requirements on the payments industry would be onerous. [The proposed regulations] translate into extra costs and a burden for the industry and companies within the industry."
But the Alston & Bird advisory questions whether the new rules would have the desired effect: "Despite the regulatory effort to prevent all unlawful Internet gambling transactions, even under the proposed regulation it would still be possible for a U.S. resident to gamble online," it stated. "The most obvious way would be for a U.S. resident to open a foreign bank account in a jurisdiction where Internet gambling is legal."
To "repatriate" the funds to the United States, an individual could then "simply transfer all or part of the money to the United States," according to the advisory.
Credit cards, debit cards and prepaid cards issued by foreign banks and other financial institutions could also be used to circumvent the UIGEA regulations.
Sandman said the regulations, if implemented, won't be effective. "The ultimate rub is that [the proposed regulations] will not prevent Internet gambling since one can easily sidestep the restrictions."
For the payments industry, the proposed regulations represent "two bad bites at the same apple," he added.
The Safe and Secure Internet Gambling Initiative supports legislation introduced by U.S. Reps Barney Frank, D-Mass., and Jim McDermott, D-Wash., that would regulate and tax Internet gambling activity without impinging on an individual's freedom to gamble online.
U.S. financial service companies can voice their concerns about the UIGEA regulations before Dec. 12, 2007.
For comments to the U.S. Department of the Treasury, go to www.regulations.gov/fdmspublic/component/main.
For more information, visit the Federal Reserve Web site at www.federalreserve.gov.
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