Casino Gaming Control Sectionâ€™s Review of Gambling September 2009

The Remote Gambling Association Ltd, 6 th Floor, High Holborn House, 52-54 High Holborn, Lon don WC1V 6RL Tel: + 44 (0) 20 7831 2195 e-mail: info@r ga.eu.com Web: www.rga.eu.com

Casino Gaming Control Section’s Review of Gambling

RGA Response to the consultation exercise

September 2009

Introduction

1. The Casino Gaming Control Section of the Department of Justice, Equality and Law Reform has initiated a review of the Irish gambling market with the objective of providing the Government with options for a new and comprehensive legal and organizational framework governing the gambling architecture in Ireland.

2. As the Section has stated in its overview of the consultation, Ireland’s current gambling law is in need of a major overhaul. This would include, as the Section has indicated, a review of remote gambling policies and their place in the gambling landscape in Ireland.

3. Against this background, the Remote Gambling Association

(RGA) submits the following comments and recommendations for the consideration of the Section and the Department.


Remote Gambling Association

4. The Remote Gambling Association represents many of the world's largest licensed, and stock market-listed remote gambling companies and provides the industry with a single voice on all the issues of importance to regulators, legislators, and key decision makers around the world. Our current membership and further information about the RGA can be found www.rga.eu.com

5. It was formed in August 2005 following the merger of two earlier associations, the Association of Remote Gambling Operators (ARGO) and the interactive Gaming, Gambling & Betting Association (iGGBA).

6. RGA membership is restricted to operators and software

suppliers. The operators must be licensed for gambling purposes somewhere in the European Economic Area, the Isle of Man, or the Channel Islands and must adhere to our code of practice on social responsibility.

7. The members of the RGA have substantial experience in

engaging with regulators and other stakeholders to ensure remote gambling is conducted in a fair, safe, and crime-free environment. This experience is based on operating in fully regulated jurisdictions where it is possible for private sector operators to obtain licences on a non-discriminatory basis.

8. We are eager to work with Irish authorities and are confident that an independent, objective review will conclude that an open and regulated market will be the best choice for consumers, operators, and the Government.

9. We also have no doubt that this can be done in a way which

provides appropriate and effective safeguards to combat crime, problem gambling and underage gambling. The RGA’s members recognize that their long term success is dependent on tackling these issues in co-operation with the relevant regulators.

10. To these ends, the RGA’s submission is intended to engage

with the Section on important matters concerning gaming and gambling policy in Ireland.


Executive Summary 11. Remote gambling is a popular mainstream leisure activity for

many consumers. It is the newest and fastest growing part of the world gambling industry and is a legitimate service within the EU, protected by Articles 43 and 49 of the EC treaty.

12. The online gambling gross gaming yield globally is estimated to be $20.8bn in 2008 of which $8.61bn comes from European players. There is a tremendous demand for online gambling among European consumers and the position in Ireland is no exception.

13. The RGA believes that there is only one logical and realistic way

to address the burgeoning online gambling market and that is to regulate it in a way that is consistent with EU law. Given the reality of ever-increasing access to forms of international communication and the ineffectiveness of prohibition and protectionist measures, a regulated, multi-operator market is the only sensible solution to a citizen’s desire to pursue a gambling leisure activity.

14. The RGA believes that a regulated market is the right solution for all EU Member States, but is especially appropriate for Ireland which stands to gain immensely from the establishment of a sensible regulatory regime. Ireland has the potential to be a world leader in the provision of remote gambling services and could accordingly reap the concomitant economic benefits: jobs, tax revenue, and economic stimulus.

15. Ireland has several characteristics that make it especially attractive for the establishment of remote gambling operators. First, it has an established reputation for good governance and business-friendly regulation. Second, it has an established reputation for excellence in information technology, communication infrastructure, and financial services. Third, it has an attractive tax regime for companies looking to locate in Ireland. Finally, it is a jurisdiction that historically has had a relatively open gambling sector that has not been dominated by an exclusive state monopoly.

16. It is difficult to estimate the exact benefits that would accrue to

Ireland because they would depend highly on the form of regulation enacted. However, we are aware, for instance, that a report by DKM Consultants has indicated that with the right regulatory infrastructure Ireland could capture five percent of the


online gambling market, generating 5,000 jobs at an average salary of €40,000 per year. We also note that Ireland has already begun to benefit as the location choice of several remote gambling-related companies.

Remote Gambling Regulation in Market Context

17. New technology and communications, especially the Internet, have empowered consumers to a greater degree than ever before. Online gambling has grown in popularity so quickly because it is an activity that consumers enjoy and it is one which they will actively seek out even where there are restrictions on advertising.

18. This was amply illustrated in a report produced for the European Commission by the Swiss Institute of Comparative Law. In the area of remote gambling it indicated that between 2003 and 2012 there would be an 87% increase in gross gaming revenues in Europe so that the sector would account for around 5% of Europe’s gambling markets. Before 2003 there was no remote gaming industry as such and yet in Europe alone it has grown enormously. That would be remarkable in itself, but it must be remembered that it has achieved this growth despite the actions of most Member States to restrict it.

19. Given this level of consumer demand it is unrealistic to believe

that it can be prohibited indefinitely. With respect, we would suggest that responsible governments ought to recognise this fact and work with the industry to ensure that properly licensed operators thrive in order to keep crime out, to ensure fairness to consumers and to put in place practical measures to assist problem gamblers and to prevent underage gambling.

20. It should be noted that enforcement measures adopted to keep

out unauthorised operators are unlikely to be effective and would result in the loss of control over both operators and the associated tax revenues. This could result in a situation such as in the USA where the UIGEA financial transaction blocking legislation, passed by Congress in late 2006 has driven consumers to use perhaps less well regulated operators who still target the market aggressively. In fact, in terms of market share, the worldwide poker market is still dominated by US facing sites, despite the UIGEA. Please find attached, Appendix A of recent testimony from stakeholders in the United States concerning the technical problems with financial transaction blocking measures.


21. These findings correspond with the Irish Government’s previous

finding in the “Regulating Gambling in Ireland” paper which stated in 5.2.3 (b) that because “[g]overnments have neither the human nor full technological resources to effectively enforce a ban on remote gaming, prohibition simply does not work.”

22. This point on enforcement measures, like financial transaction blocking, needs elaboration given the proliferation of enforcement measures being considered by jurisdictions. The European Commission has already broached this subject in its detailed opinion to France on financial transaction blocking and in its detailed opinion to Germany on the Interstate Treaty on Gambling. In both cases the Commission declared that the provisions in question raised serious questions as to compatibility with EU law. We have commissioned legal analysis to this extent and would be happy to share this with you. It should also be noted that the introduction of the Single Euro Payments Area in 2010 will expand access to payment providers and will create legal doubt whether such restrictions will be compliant with EU law.

23. There are also serious implications for Irish banks given the

technical, compliance, and liability issues raised by such mechanisms. Recent testimony from US financial services providers at a Congressional hearing on the implementation measures of the UIGEA repeatedly asserted that the provisions were not technically feasible (for instance checks and third party payment providers), and raised huge compliance costs due to severe liability penalties. Even after many banks and financial institutions have voluntarily implemented these provisions, US citizens still have access to remote gambling services; proving once again that prohibition only pushes demand towards operators licensed in other jurisdictions.

24. Accordingly, the RGA believes that regulating operators is the

only sensible solution to achieve the objectives of the Irish government.

Operator Access 25. All operators should be required to satisfy the regulator about

their probity, financial stability, operational capability, and that they have adequate measures in place to combat problem and underage gambling.


26. Additional requirements could consist of outcome testing of the technical equipment; the security of key components against fraud; and personal licensing for key personnel. These technical measures serve to assure regulators that technical solutions are possible for the prevention of fraud and the protection of consumers.

Personal licensing 27. The RGA supports a personal licensing regime for key

management functions, irrespective of the location of the holder of the personal licence. Such licences should not discriminate between applicants directly or indirectly on grounds such as nationality or residency. Key personnel should be required to meet minimum standards and demonstrate they are fit, proper and responsible individuals. Licences should set out clearly the extent to which key persons are criminally and civilly liable for any breach of the licence that they could reasonably have been expected to prevent. This is another step which places direct liability on key management which encourages proper management of the service.

Codes of Conduct 28. Any new rules should oblige operators to abide by a series of

Codes of Conduct which should be complementary to the existing laws and regulations which govern key aspects of gambling in Ireland such as money laundering, advertising, and consumer protection. Any additional regulations, where deemed necessary, should be proportional to the risks that are being addressed.

29. The RGA Code of Conduct was developed by members with enormous experience in the remote gambling field. Although not intended to be a complete substitute to regulation, the Government should be careful not to displace industry best practices with regulations requiring antiquated or demonstrably ineffective practices.

Taxation 30. Taxation of regulated remote gambling operations should be

sensitive to global rates of taxation and the current tax rates of jurisdictions where most operators are located. Very high rates of taxation, either from corporate taxes or gaming fees, are likely


to result in Irish customers gambling with sites without an Irish licence.

31. If the rates of tax are set at a level which is not economically viable for operators, they will either not apply for an Irish licence or, if they do, pass on the costs to consumers who would turn to operators from jurisdictions where better value can be offered. Instead, tax levels should ensure that Irish licensees can be globally competitive with operators located in other jurisdictions.

32. It should also be noted that taxation is one area where a level

playing field between all gambling sectors is not necessarily good public policy. The competitive market for online gambling is not across gambling segments, but across remote gambling operators on a global scale. The substitution effects of gambling sectors (betting, casinos, poker, bingo, racing, etc) are extremely limited given that the consumer proposition that underpins each sector is different. Different demographics, simplicity factors, and other dynamics differentiate gambling sectors. This is confirmed by the fact that so many offline operators have established online operations which would indicate a complementary aspect to their business, not a substitutional one.

33. Taxation should be based on gross profits, calculated as total

revenues minus player winnings. Taxation on the basis of turnover is an economically inefficient choice that results in lower consumer value, weakened operator competitiveness, and smaller government revenues.

34. There should be no double taxation on operators providing services in multiple jurisdictions and we would urge the Irish government to make the necessary arrangements with other Member States.

35. It is reasonable for operators to be subject to an authorisation fee. This should represent a contribution to the cost of regulation.

Player Protection Measures

36. The RGA believes that reputable, well regulated cross border gambling operations pose no threats that cannot be fully addressed and remote gambling can be controlled in a way that meets all reasonable public policy, security and health concerns.


37. The RGA submits two general observations. First, that while there is a potential for remote gambling to have negative side effects, in practice these harms are very rare. Second, the remote gambling industry should be seen as a partner in providing effective player protection as it is in its self-interest to do so.

Underage Gambling and Age Verification

38. Although there is no evidence that underage gambling is a

widespread problem, it is a concern that is taken seriously by the remote gambling industry. The technological solutions that have already been implemented by remote gambling operators are effective safeguards against underage gambling. The primary tool for this is the use of age verification (AV) procedures: validation via a verification service or through direct access to reliable documentation such as a passport or a birth certificate. As these procedures are continuously improving, it should be left up to individual operators to select the most efficacious one.

39. Remote gambling operators should also:

• Make links available to, or provide adequate information about, reputable filtering services like the Internet Content Rating Association (ICRA) so that parents and others can take any necessary steps to prevent their personal computers being used for inappropriate purposes.

• Make clear through messaging or the display of a ‘no under 18s’ sign on the homepage of the internet site that children are not permitted to gamble. A clear message to this effect should also appear during the registration process.

• Include a clear policy for dealing with underage gamblers.

• AV checks should be initiated as soon as possible when a

consumer initiates a transfer using a payment method available to under 18s.

40. For its part, the Irish government should ensure that there is a

publicly accessible database of identification for its citizens, such as a passport or driver’s licence database. This allows for better and independent validation of a person’s age.


Problem Gambling

41. The RGA shares the goal of the Irish government to combat problem gambling. The RGA is always willing to work with regulators, academics, and charities in order to minimise the risk and harms of problem gambling. As providers of gambling services, the members of the RGA are experienced and well-placed to understand the complex issues involved. Its members have developed sophisticated player protection procedures to identify problem gamblers and take measures to deal with any problems.

42. The RGA would also point out that it is a fallacy that access to gambling is directly correlated to a rise in problem gambling. For example, it is clear that the number of Internet gamblers in the UK, where access is more readily available, is higher than in many jurisdictions, but that levels of problem gambling, as presented in the latest UK Gambling Prevalence Study, are similar or even lower than many EU jurisdictions. That example also shows that there has been no overall growth in the level of problem gambling since the introduction of online gambling.

43. The RGA supports the following measures to protect players

from problem gambling:

• Links from the site’s home page to both the player protection and responsible gambling pages. Links should also be readily available from any screen where game play may occur.

• The social responsibility page should contain as a minimum; a

message that gambling could be harmful if not controlled and kept in moderation; advice on responsible gambling and sources of help on problem gambling, including contact details; a ‘self assessment’ process to determine risk potential either on the page or via a link; a link to the player protection page if that is different; links to a filtering program to enable customers to prevent children gaining access to gambling sites via their computers; and details of the company’s social responsibility policy.

• The player protection page information should contain the

measures available (including customer set deposit limits and self exclusion facilities) to the customer.

• Applications to set or decrease deposit limits should be dealt

with as quickly as possible, but if a customer wishes to increase


a previously set deposit limit then he should have to wait 24 hours to do so. This would act as a suitable ‘cooling off’ period.

• Where available an up-to-date account balance will help

customers monitor their spending.

• Their gambling history should be available on request, dating back for a minimum of a month, including all deposits and withdrawals.

• The provision of a self-exclusion facility for any customers who

wish to exclude themselves from gambling on the operator’s website. During the chosen period the customer will also be excluded from all forms of communication from the operator. The chosen period should be for a minimum of 6 months.

• Either provide a self assessment test or a link to one (such as

that on the British Gamcare website) to help customers gauge whether or not they are developing a problem.

• Rules should be available about the gambling products that are

on offer and those rules should not be changed during the course of a gambling event.

44. There are further options that might be considered and many of these appear in our own code of practice, but in the interests of brevity we will not list them here. Suffice it to say, if the review concludes that the Government should introduce a regulatory regime we would be more than happy to work with the new regulator to implement best practices.

45. The remote gambling industry has not waited for government intervention before acting to reduce any negative consequences of remote gambling. For example, in the UK the gambling industry has agreed to donate a minimum of £5 million for each of the next three years to help fund problem gambling related research, education, and treatment. It also supports other initiatives as the Responsible Gambling Awareness Day.

Customer Responsibility 46. Without taking away from the basic principle that customers are

responsible for their own gambling choices, the nature of the activity is such that information should be made available to


empower consumers to gamble responsibly. Related customer communication should therefore:

• Give clear guidance that in order for gambling to be a fun,

social activity, the customer needs to ‘stay in control’.

• Make information available about player protection and responsible gambling.

• Indicate sources of help and how they can be accessed.

• Provide easy and obvious methods on the site for customers to submit complaints or queries.

Advertising 47. The RGA believes that the advertising of regulated remote

gambling operators should be permitted as would the advertising of any other service provider, subject to restrictions based on the nature of the gambling industry. The RGA and its members have vast experience in the area of gambling advertising and are ready to meet with members of the Government to fashion reasonable advertising regulations. The RGA supports the following propositions relating to advertising:

• Advertising shall be responsible in its promotion of remote gambling

services and subject to the advertising and gambling regulator’s rules.

• Advertising should not be misleading.

• Advertising should clearly name the operator or provider of the service.

• Advertisements should be legal, decent, honest and truthful.

• Promotional email should only be sent in accordance with relevant data protection and consumer protection regulations and legislation.

• No advertisement should bring the advertising industry into disrepute.

• Advertisements and promotions should be socially responsible.

• Care should be taken not to exploit the young, the immature or those who are mentally or socially vulnerable.


• Advertisements should not be directed at people under the age of

18 through the selection of media, style of presentation, content or context in which they appear.

• Persons portrayed gambling should not be, nor appear to be, under 18.

• There should be honesty at all times with regard to the chances of winning, and the odds or payout ratio that applies to the gambling on offer. Free play games should operate to the same payout ratio as cash games.

• Consumers should be offered advice about the gambling facilities on offer. It should not encourage them to re-stake their winnings; increase the amount they have decided to gamble; chase their losses; continue gambling when they have indicated that they wish to stop; or enter into continuous play for a prolonged period of time.

Public Order

48. Opponents of a regulated open market often raise concerns about the potential of remote gambling to contribute to crime, fraud, and money laundering. These are concerns that the remote gambling industry takes seriously because its future success and credibility depend on properly addressing them. However, the actual risks associated with remote gambling are extremely low. When fashioning policy, it is important to weigh the actual harms caused by remote gambling against the benefits. Too often, policy is made on the basis of asserted harms that are not supported by factual evidence.

Money Laundering 49. There is no proof of any serious money laundering problems

involving reputable companies in properly regulated jurisdictions. On the contrary, the regulated nature of remote gambling combined with the detailed recordkeeping of the relevant banking and card-related systems make remote gambling one of the least attractive routes for money launderers.

50. According to a report conducted by MHA Consulting in 2009 on behalf of the RGA, remote gambling is not attractive to money launderers because “... the identities of the gamblers are known;


the financial transactions between the bettors and operators are all in electronic format; and all of the wagering is recorded.”

51. Further, all remote gaming operators within the EU are subject

to the EU Money Laundering Directive and the consequent local regulations in each jurisdiction where they are licensed.

52. Finally, the RGA would urge that policymakers look for objective evidence of money laundering before implementing overly restrictive guidelines that would reduce consumer and operator welfare.

Fraud 53. There is no proof of any systematic gambling fraud involving

reputable companies in properly-regulated jurisdictions. Appropriate levels of regulation will provide adequate safeguards against potential risks.

Crime 54. There is no proof of organised crime groups being involved with

reputable companies in properly regulated jurisdictions.

55. To ensure that remote gambling remains crime-free, a well regulated licensing system would limit licences to only suitable persons and organisations.

Compatibility with EU law

56. The RGA firmly believes in the fundamental rights enshrined in Article 49 of the EU Treaty concerning the provision of services. We believe that a private operator properly established in a Member State should have access to the internal market. The RGA does recognise that a Member State may wish to provide regulations which go beyond this basic freedom, but the ECJ only accepts such provisions if they are reasonable, proportionate, consistent, and non-discriminatory.

57. A number of jurisdictions have established a licence based system for the provision of online gambling services. These include Italy, UK, Malta, and the Madrid Autonomous region in Spain. Current jurisdictions considering a regulated market include France, Belgium, Denmark, Sweden, and Spain. The RGA supports a move towards a system for market access although we maintain that the freedom of services provision in


EU law gives gambling operators the right to provide cross-border services.

Recognition of EU Licensing Regimes 58. The RGA believes that any authorisation/licensing scheme

should be considered against current regulations that govern private remote gambling operators in other jurisdictions. We feel it should acknowledge that some Member States already have high standards of regulation in the field of remote gambling. This form of mutual recognition should help rationalize the regulatory process for EU remote gambling operators seeking licences and having access to markets.

59. In reviewing applications, we would urge the Irish Government to take into account any similar regulatory processes that applicants have been through in other jurisdictions and for it to liaise with regulators in those jurisdictions to streamline the process. We would be happy to provide contact details of the relevant regulators if that would be helpful.

60. The RGA believes that all efforts should be made to accommodate operators already authorised in responsible jurisdictions. The imposition of identical or less stringent regulations by the Irish government would result only in redundant and burdensome compliance with no additional benefit to consumers.

61. Operators in possession of licences from regulated jurisdictions within the EU should be subject to less stringent requirements under an authorisation scheme, should it be decided to introduce a regime of that kind, than operators which do not hold a licence from well regulated jurisdictions. This equitable treatment should also be extended to operators from well-regulated jurisdictions outside the EU such as Alderney or the Isle of Man which have been recognised as having comparable standards.

62. The authorisation should come from only one source. There should not be a layering of regulatory approvals such as local, regional, and federal. The nature of online gambling services requires a single pan-country authorisation.


Conclusion 63. RGA members, between them, have more experience and

knowledge than anyone else in the world in the area of remote gambling services and gambling regulation. Our members share the objectives of combating crime, ensuring fairness, and protecting the young and vulnerable. It is thus in our best interest to assist Ireland in the creation of an effective and sensible regulatory regime that would be to the benefit of consumers and operators.

64. It is our firm belief that properly licensed EU-based providers of gambling services should be entitled to the benefits of the internal market. Regulation rather than prohibition is the only solution that will address the valid concerns of European governments and it would of course be beneficial to Ireland if operators based there could access as wide a market as possible.

65. The establishment of a fair licensing regime would enable Irish-based companies to compete in the sizable and growing international gambling market. Moreover, Irish-based companies could have significant competitive advantages due to Ireland’s status as a world leader at information and technological services.

66. If the RGA can be of further assistance in any way throughout the gambling review, we stand at your disposal.

The stance of US Financial Services firms on the ban on

internet gambling transactions

The Unlawful Internet Gambling and Enforcement Act (UIGEA) requires private firms in the

financial services sector to identify and block unlawful Internet gambling transactions.

The US Treasury and the US Federal Reserve System are publishing a notice of proposed

rulemaking NPRM that requires designated payment systems and all participants to establish and

implement written policies and procedures.

In total 127 public submissions were made, including comments from members of the public,

religious and social groups, gambling & gaming companies, state agencies, and firms in the

financial services sector. This document summarises the opinions expressed by the latter. The

full list of submissions can be found at http://tinyurl.com/2xt8by or from the Brussels office of

Policy Action.

Credit Card & Transaction Services

MoneyGram International

“Requiring an entity like MoneyGram to interpret gambling laws and then identify offending

gambling businesses or individuals is simply not a realistic method to implement the Act.

Imposing these same requirements on a multitude of participants in U.S. payment systems

increases the total cost of the proposed Rules exponentially and unreasonably.”

The Money Services Roundtable (TMSRT)

“As in the case of ACH originators or wire transfer system originating banks, the send agents are

not in a position to determine the purpose of the funds transmission. In addition, as noted in the

ACH and wire transfer context, the customer/originator may misstate the purpose or fail to

comprehend the prohibited nature of the purpose of the transaction and, of course, the send

agent will be unable to determine whether the originator’s characterization of the transaction is

accurate.”

VISA

“a US cardholder who is temporarily located outside the US may attempt to conduct a gambling

transaction over the Internet that would be lawful in the local jurisdiction…the card issuer which

maintains the cardholder’s US-based billing address, must be able to rely on the policies and

procedures of the card system…and accordingly, identifies and blocks the transaction as a

restricted transaction. Similarly, in many other circumstances, it is simply not practical to

distinguish between restricted transactions and transactions that are not restricted on a real-

time basis.”

MasterCard Worldwide

“It is not clear to MasterCard whether appropriate codes - or other mechanisms - could be

developed to block (or allow issuers to block) only those transactions that are actually restricted

transactions. Among the difficulties with developing such an approach is evaluating and

understanding the legality of any given Internet gambling transaction.”

Checkfree Corporation

[on the requirement that card systems and money transmitters include ongoing monitoring of

websites to detect the unauthorised use of the payment systems’ trademarks]

“We are extremely concerned about this proposed requirement, as we find it to be overly vague,

potentially costly, and burdensome. The Proposed Regulation does not provide any guidance as

to what level of monitoring would be required for the payment system to be deemed in

compliance and thus within the safe harbor.”

Western Payments Allliance

“…it places a significant burden on the financial community to sift through the complexities of

state and other laws to determine what might be legal or illegal practice by a business.”

PayPal

[On the prospect of developing a list of unlawful Internet gambling businesses]

“Developing such a list would [require] significant investigation and legal analysis. Such analysis

could be complicated by the fact that the legality of a particular Internet gambling transaction

might change depending on the location of the gambler at the time the transaction was initiated

and the location where the bet or wager was received.”

Radix Consulting

“Our extensive experience in payment systems and our work with law enforcement agencies

investigating Internet tobacco sales has convinced us that the majority of originating financial

institutions that are working with third party senders have no idea of the business nature of the

transactions that are being submitted by those third party senders.”

National Money Transmitters Association (NMTA)

“The Act seeks to use the financial system as a 'choke point' to combat Unlawful Internet

Gambling (UIG.) In general, this approach has proved problematic for all concerned: it is usually

difficult to write such rules, difficult to follow them, difficult to let good transactions through, and

difficult to tell if the measures are working or are worth the trouble.”

First Data Corporation

“Businesses that are engaged in illegal activity would not be inclined to code the transactions in

a manner that would make them easy to identify and block. In reality, if an illegal Internet

gambling code were to be established, it is highly unlikely that merchants would use it so that

we, as a processor, could in turn block their transactions.”

The Clearing House

“To expect payment-system participants to police the transactions as they are being processed

and to hold the banks responsible for any restricted transactions on an after-the-fact basis is to

put them in an untenable situation.”

Commercial Banking

Bank of America

“The proposed rule creates additional oversight responsibilities for financial services companies

to undertake at a time when regulatory burdens have been shown to inhibit the competitiveness

of U.S. financial institutions.”

Bank of Oklahoma

“While different levels of technology and functionality exist within each of the payment systems,

none of the payment systems appear capable of completely differentiating between restricted

and unrestricted transactions… It is our understanding that the major card brands assume that

only unrestricted (legal) transactions are processed by their participants and that unique

Merchant Category Codes and Transaction Codes that distinguish specific forms of gambling are

not necessary. However, the Agencies’ notice as well as our experiences are similar in that card

issuers perceive restricted (illegal) transactions are processed and thus all gambling (restricted

and unrestricted) transactions are often blocked.”

Citibank

“In articulating the difficulties involved in compiling a list of unlawful internet gambling

businesses, the Agencies have put their finger on the reasons why Systems Participants cannot,

given the current vague definition, determine how to comply with their obligations under the

regulation.”

Wells Fargo

“This transaction identification difficulty is further increased by the challenge the financial

institutions confront in identifying the businesses themselves engaged in apparently unlawful

Internet gambling. Certainly, the Agencies openly acknowledge this difficulty by electing not to

provide a list of such unlawful Internet gambling businesses due to "significant investigation and

legal analysis."13 Presumably, the financial institutions are saddled with the burden of

undertaking such significant investigation and legal analysis.”

Compass Bank

“We believe the Proposed Regulation fails because it requires a specific kind of functionality

within the payments systems that simply does not exist.”

M&T Bank

“M&T Bank does not believe the costs of creating a forfeiture process related to internet

gambling have been accurately estimated or incorporated into the analysis of the financial

burdens of the regulation… This is such an enormous burden that M&T Bank believes that banks

will adopt internal policies refusing to do business with persons engaged in any internet

gambling transactions, lawful or otherwise…[and] financial institutions will refuse to do business

with entities directly involved in sponsoring internet gambling activities.”

Financial Services Roundtable

“Financial institutions cannot do OFAC-type screening unless the government provides an OFAC-

style list of names, which the Agencies have made clear they are reluctant to do. Payment

systems and financial institutions also are unlikely to compile lists of unlawful Internet gambling

businesses for the same reasons that the Agencies have given, together with the added

considerations that they do not have the resources that the government has to do the

investigations that would be necessary for compiling a list and because of concerns about

possible legal liability to any entity that is mistakenly placed on a list.

The proposed rule places the onus on financial institutions to know the purpose and legality of

payments. Since gambling laws are geographically based, financial institutions would need to

determine where the customer is located when conducting in gambling activities and where

computers and other equipment to process the transaction are located.”

SunTrust Banks

“If implemented, this regulation would have significant implications for many aspects of the

banking system, and more time is needed to consider the details of the proposal and how it

could be put into practice…We believe the proposal is seriously flawed and would result in

significant new regulatory burdens for banks while still not achieving the objectives of the

underlying statute.”

Consumer Bankers Association

“CBA and its members believe that the use of the US payment system to enforce various legal

requirements imposed by legislation often not directly related to banking places unnecessary

stress on this system and has grown to a point that it is a serious burden on banks and other

payment system participants.”

Kansas Bankers Association

“It occurs to us that there will be many customers who will not qualify as gambling entities. A

question we would pose is whether the proposal will speak to the process a financial institution

must have in place to demonstrate that it conducted an analysis of their customers to determine

whether there was a gambling relationship.”

Huntington National Bank

“While Huntington is willing to do its part to implement government policies, the requirements

of the proposed rule in deputizing banking institutions and other payment system participants to

enforce a social policy against certain forms of gambling create a significant burden on

participants and the payment systems affected. This burden is exacerbated when the proposed

rule shifts the burden of determining which transactions are legal or illegal to the payment

system participants and payment systems, apparently because the federal regulators do not

want be making such determinations, and in fact, apparently cannot even agree in certain cases

on what is legal or not.”

Glacier Bancorp

“To have staff checking the millions of ACH transactions daily scanning for internet gambling is

inefficient and costly.”

American Bankers Association

“ABA believes that the proposal, in large part due to the nature of the statute itself, will fail to

create a practical process for intercepting prohibited conduct that maintains an efficiently

functioning payments system.”

Securities Industry and Financial Markets Association (SIFMA)

“While it may be possible for an originating bank to obtain information from its customer as to

the purpose of the payment, the bank is not in a position to verify the accuracy of the

statement. Accordingly, it is not reasonably practical for an originator's bank and an

intermediary bank in a wire transfer system to implement policies and procedures that would

likely be effective in identifying and blocking or otherwise prevent or prohibit restricted

transactions.”

Branch Banking and Trust Company (BB&T)

“BB&T strongly believes that in its current form, the proposed regulation has a number of

requirements and areas of inadequate clarity that would make compliance unnecessarily

confusing and extremely difficult. Our concerns include, but are not limited to, vague definitions

of certain terms and requirements of participants and the potential burden put on financial

institutions if certain provisions of the rule are adopted as written.”

Albany Bank & Trust

“The cost and difficulty to comply with this proposed rule would greatly increase the cost of

operations for this bank.”

Alston & Bird

“The Proposed Regulation is fatally deficient.”

Farmers Bank & Capital Trust

“Our ACH system is one of the most effective payments systems and this regulation will muddle

that effectiveness will making banks the primary “rule” maker, regulator and decisions maker.”

Sovereign Bank

“Placing the burden of identifying unlawful Internet gambling businesses on the employees of

every financial institution in the country would not be effective and would place yet another

significant financial burden and liability on this country’s financial institutions.”

Western Security Bank

“This intrusive monitoring places financial institutions between their customers and their money

without cause… Additionally, the cost to monitor this activity will be burdensome to financial

institutions and ultimately the cost would have to be passed on to the consumers, through

higher service charges and/or lower rates paid for their deposits. ACH or electronic transactions

comprise a huge amount of the transaction base being processed by financial institutions on a

daily basis. To monitor for a specific type of purchase would be near impossible to perform with

the current ACH structure in place.”

Community Banks & Credit Unions

National Association of Federal Credit Unions (NAFCU)

“[We] would like to take the opportunity to express our concern about the emergent trend

towards effectively deputizing credit unions and other financial institutions to guard against a

growing array of crimes.”

Credit Union National Association (CUNA)

“the proposal raises a number of serious and practical concerns that we believe will make

compliance for institutions extremely difficult, if not virtually impossible.”

Independent Community Bankers of America (ICBA)

“ICBA is deeply concerned when our nation’s payment systems are used to track, analyze, and

block individual payment transactions given the potential for such activity to undermine payment

systems efficiency. Payment systems were not designed for this function..”

Association of Corporate Credit Unions (ACCU)

“The basic rule should be the "know your member" rule, and corporate credit unions do not and

cannot know the natural person member of a credit union whose transaction is flowing through

the corporate credit union..”

Boeing Employee Credit Union (BECU)

“In today's automated world, it is impractical (to impossible) to analyze, and execute on, each

transaction that is in question. The burden far outweighs any benefit. Requirements to analyze

all ACH transactions would make our automated systems ineffective as this would require a

manual review.”

Corporate Central Credit Union

“Corporate Central has concern regarding the proposed rule expectations for a financial

institution to monitor for unlawful Internet gambling.”

California and Nevada Credit Union Leagues

“the current proposal falls substantially short in recognizing the complexity and operational

burdens that implementation of the proposal would involve. We believe these shortcomings are

significant enough to make the proposed rules unworkable — or, at the least, highly ineffective

… We are also troubled that the proposal does not contain a complete assessment of the

potential costs to credit unions, financial institutions, small businesses, and other payment

system participants.”

Corporate One Federal Credit Union

“Given the proposed impact on operations, Corporate One believes the Proposed Rules should

broadly exempt third party processors and intermediary financial institutions. Corporate One

maintains this position, because third party processors and intermediary financial institutions do

not actually own the accounts involved, nor do they have direct interaction with those engaged

in unlawful Internet gambling. Consequently, third party processors and intermediary financial

institutions are not in a position to identify restricted transactions.”

Navy Federal Credit Union

“it seems irresponsible to require 18,000 depository institutions to individually research

numerous complex state and federal laws as a prerequisite to developing individual institution

policies and procedures.”

State Department Federal Credit Union

“we are concerned that the implementation of the Act will create an undue burden on financial

intuitions and slow the pace of innovation in the financial services industry by effectively making

the financial services industry the Internet gambling police.”

U.S. Central Federal Credit Union

“…the inability to easily distinguish between Internet gambling transactions that are lawful and

those that are unlawful places financial transaction providers with a difficult choice. Because of

the difficulty of determining what Internet gambling transactions are lawful, it is likely that

depository institutions will simply choose to refuse to do business with persons who engage in

Internet gambling transactions.”

Think Tanks & Other

Center for Regulatory Effectiveness

“The Departments has not provided the required objectively supported estimate of burden on

depository institutions, card systems, money transmitting businesses and other financial

organizations.”

Chamber of Commerce of the United States of America

“the Chamber strongly encourages you not to approve the proposed collection of information

associated with the UIGEA unless and until it fully complies with all statutory requirements..”

Comptroller of the Currency

“It is unclear whether these generally applicable requirements are realistic or are likely to be

effective in all cases. The foreign institutions are not subject to the Act and the contractual

provisions suggested by the Proposed Rule may be difficult for U.S. banks to negotiate or

enforce as a business matter..”

Depository Trust & Clearing Corporation

“Because the DTCC clearing agency subsidiaries are not in a position to assess the risk that the

entities with whom the subsidiaries deal directly are submitting Restricted Transactions,

imposition of the requirements of the Proposed Regulations on the securities clearing agencies

would cause delays in processing and hinder their mission to clear and settle transactions

propmptly and accurately.”

Electronic Check Clearing House Organization

[on the obligation for inclusion of UIGEA adherence into the terms of Commercial Account

Agreements]

“We are concerned that this example of a policy will, as a practical matter, be difficult for banks

to implement for existing commercial customers. It is our experience that many commercial

customer agreements cannot be amended without the written agreement of the commercial

customer.”

Casino Gaming Control Sectionâ€™s Review of Gambling September 2009

Documents

Transcript of Casino Gaming Control Sectionâ€™s Review of Gambling September 2009