Online Casino Gambling

Though many players still are quite not sure what it means, the UIGEA definitely represents the disdain U.S. lawmakers have for online gambling.  One of its biggest gripes is that internet gambling is an activity that can act as a vehicle for money laundering.  While this is a genuine concern of sorts, it really holds no water as money laundering has been directly tied to various land-based casinos and sports betting operations.  In fact, the golden days of Las Vegas were infamous for this type of activity.  Today, the gambling industry has changed dramatically as many laws and preventive measure have been implemented to keep money laundering away from the business.  Does the same hold true for online gambling?

According to the RGA (Remote Gaming Association), the online gambling industry isn’t the haven for money laundering that many think it is.  With the aid of MHA Consulting, the RGA released a new report and stresses that there have been no definitive examples of money laundering occurring within licensed online gambling jurisdictions.  On the other hand, hearing this news from the RGA should be no big surprise, especially when considering that it is a trade body for several leading online casinos and software developers.  Because of this, it is natural that the organization would be doing everything possible to distance the industry from money laundering.

The truth of the matter is that the RGA didn’t have to cover up much of anything for this particular report.  How can we be so sure?  Well, MHA Consulting came to conclude that statutory and self regulation have both played a major role in dramatically reducing the number of documented money laundering incidents in jurisdictions that license internet casinos.  In addition, the report also concluded that online gambling is not particularly vulnerable to money laundering activities.  Other than the lack of documented cases, these findings were attributed to the actual makeup of the online gambling industry itself.  Since the transactions are processed electronically, all betting activities are recorded and analyzed, and the identities of all gamblers are known, the industry makes itself transparent for investigations and comprehensive audits.  The information used in the RGA’s report was complied by  reviewing bodies in European licensing jurisdictions, which are more open about online gambling than any other in the world.

The big story is that both the RGA and MHA Consulting have drawn the conclusion that the online gambling industry is in the clear for now.  However, the report also gives indication that the industry needs to remain proactive in the area of detecting and preventing the threat of money laundering.  To help achieve this, online casino operators should only work with licensing jurisdictions and stay aware of the advanced tactics being employed by the more sophisticated money launders.  Because the industry is still relatively new with equally new regulations, it is imperative for casinos to work together to keep the criminals away from the industry.

Traditionally, U.S. gambling regulations have been reserved for state governments as opposed to ruling at the federal level.  A prime example would be the Wire Act.  As we all know however, federal law often finds a way to overthrow state legislation.  The DOJ (Department of Justice) has expressed on a number of occasions that the act prohibits all variations of internet gambling in the United States.

Enter the Wire Act

Enacted in 1961, the Wire Act was passed to prevent bookmakers from taking sports wagers via telephone.  At one time, accusations of violations were typically accompanied by a range of other charges such as conspiracy, money laundering and violations of the Illegal Gambling Business Act.  The one key point stressed by gambling proponents is that the Wire Act is enforced towards the gambling operator.  There is no language within the law that says it is illegal for the consumer to place a wager.

Because there was simply no way to have predicted online gaming in the early 1960s, from a practical aspect, there is no way the Wire Act could apply to casino gaming over the internet.  In recent times, the DOJ has been quite busy tangled up in legal disputes in pursuit of conviction for gambling operators, years before Congress even got involved.  In 2000, the DOJ garnered a successful conviction of Jay Cohen, World Sports Exchange president, for violating the Wire Act.

The So-Called Internet Gambling Ban

The UIGEA (Unlawful Internet Gambling Enforcement Act) was enacted in the fall of 2006, a law which states that it is illegal for any financial institution to facilitate monetary transactions between offshore gambling operators and U.S. consumers.  However, this legislation has been controversial from the start as it does not state that it is illegal for those consumers to gamble on internet sites.  The introduction of the UIGEA has led the online gambling industry’s biggest players away from the U.S. market, even though many private entities continue to service it.  These companies are banking that the UIGEA will not be able to block payments, giving them the ammunition to continue operating in jurisdictions in which U.S. authorities have no power.

No-Online Gambling States

Several states, including Illinois, Indiana, Louisiana, Michigan, Nevada, Oregon, South Dakota and Washington have passed laws that prohibit all unauthorized forms of online gambling.  Both Hawaii and Utah have also passed similar legislation.  Lawmakers in Nevada passed a law that permits intrastate internet gambling but have taken very few steps to introduce a viable system.  The argument has always been that implementing such a system would require advanced technologies that have the ability to accurately verify a player’s age and location, a system the DOJ claims would violate federal legislation.

In April of 2008, federal regulators and representatives from the financial industry went before Congress and testified that attempts to enforce the UIGEA would lead to substantial regulatory problems.  Resulting from this testimony was a new legislation introduced by representatives Barney Frank and Ron Paul, supporters of the legalization and regulation of online gambling.  This proposed legislation would prohibit the DOJ, Federal Treasury and Reserve from enforcing any regulations associated with the UIGEA.  To the current day, no official regulations for UIGEA enforcement have been adopted, leaving many still to wonder: what does this law really mean?