Bankers Fight Back Against the UIGEA
The passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006 sent shock waves through the internet gaming industry. Publicly traded online gaming companies saw their stocks plummet, thousands lost their jobs and online payment processors suddenly found themselves shut out of the lucrative US market.
UIGEA in the United States has been less than a resounding success and one wonders just what the Canadian sponsors of such legislation are thinking. Historically, the Canadian government has opted for regulation rather than prohibition unlike their neighbors to the south.
In a filing to the Treasury and Federal Reserve the Financial Services Roundtable, an organization that represents many in the banking industry, said "The statute and the proposed rule expand the role of financial institutions to police laws that are more appropriate for law enforcement agencies." At present the rules require, in effect, that banks and other financial institutions know the purpose and legality of payments in an area where Federal and State laws often conflict.
The American Banking Association which had originally been neutral to UIGEA now is expressing serious reservations. In a terse statement the ABA said "(W)e believe that UIGEA will in the end catch more banks in a compliance trap and do greater damage to the competitiveness of the American payments system, than it will stop gambling enterprises from profiting on illegal wagering." Under the present rules even the definition of what constitutes unlawful internet gambling remains undefined.
The ABA feels, and rightfully so, that enforcement of this law rests squarely with established law enforcement agencies. Putting the burden of enforcement on banks is, in the eyes of the ABA, an unfunded government mandate. The opposition by banks to UIGEA may be the best hope for reform or repeal. The banking industry spends millions each year on lobbying and makes significant donations to political campaigns. Their political influence is far reaching and is felt in both political parties.
With the US economy headed for a recession the last thing the banking industry needs is to be burdened with unclear regulations that will be costly to implement. In essence the government is saying that the sophisticated systems of the FBI, Secret Service, and other law enforcement agencies are inadequate for tracking online gambling transactions so they are dumping the responsibility on the banking industry and the banking industry is not happy.
The ABA and other banking organizations and lobbying groups could prove to be the unexpected ally of the online gaming industry. With their considerable political clout the banking industry could force the government to take another look at UIGEA. Even the most fervent opponents of gambling in congress will listen to complaints from banks and their lobbyists. The objections of the Financial Services Roundtable and the ABA could be the best hope for congressional action to repeal UIGEA and regulate rather than prohibit.
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