Internet Gambling Enforcement Act

The Unlawful Internet Gambling Enforcement Act aims to limit on-line wagering by placing new prohibitions on banks making payments to internet gambling business.  Congress concluded that new mechanisms for enforcing gambling laws on the Internet were necessary because traditional law enforcement mechanisms are often inadequate for enforcing gambling prohibitions or regulations on the Internet..

Whether you are an individual who engages in Internet wagering, or a business that processes these wagers, it is important to know what banks are now doing to ensure that these activities are not being conducted unlawfully.  The Unlawful Internet Gambling Enforcement Act (UIGEA) requires banks to do certain things, and permits them to do others.  Here’s what you should know:

What Banks Must Do

Banks must have policies and procedures to block transactions that finance Internet gambling by credit and debit cards. 

• Banks are permitted to rely on the procedures established by the credit card operators (e.g. Visa, MasterCard, American Express, Discover) to block illegal gambling transactions.  While it is up to these operators to determine their specific procedure, it is possible that they may not differentiate between lawful and unlawful gambling, choosing instead to block all gambling transactions.
• Banks must screen commercial customers at the time of an account opening to establish the level of risk that the new account holder might be for participating in restricted activities.
• When a bank receives a report from a law enforcement or regulatory agency that an account is processing restricted transactions, the bank must first determine whether the transactions are legal or illegal, and if illegal, take appropriate actions (such as closing the account or restricting access to certain payment systems).
• Banks are required to notify their commercial customers that illegal Internet gambling transactions are prohibited and cannot be processed through the bank.

What Banks Are Permitted to Do

Banks and credit card operators are permitted to “over block” transactions, which means that they can block Internet gambling transactions whether legal or illegal.  Because of this option, we may permit a certain wagering transaction, but the credit card operator may decide to block it. We may block a transaction, even though it would have complied with the credit card operator’s procedures.