October 30, 2007

UIGEA rules ‘burdensome’

The proposed rules for enforcement of the UIGEA have been labelled as “burdensome” and “unprecedented in scope” in a legislative and public policy advisory document released by law firm Alston and Bird.

In a detailed analysis of payments methods and the impact of the draft regulations on each, the paper says: “The proposed regulation may also raise concerns about regulatory burden due to the impact of implementation costs on US-based participants in the payments system that are not applicable to similarly situated foreign firms.”

The UIGEA’s coverage of all forms of cards, including debit cards, stored-value cards and pre-paid cards as well as credit cards without any exemption for gift cards is also highlighted. As is the likelihood that foreign bank accounts provide an effective and non-legislated route for payments to be processed for US gamblers.

Responding to the paper, spokesman for Washington-based lobbying group the Safe and Secure Internet Gambling Initiative, Jeffrey Sandman said that the challenge US financial service firms face is that enforcement of UIGEA will be very difficult. He said: “The proposed rules create an unprecedented and unwieldly regulatory burden on the US financial services sector…companies are being left to interpret ambiguous state and federal gambling laws which do not clearly differentiate between legal and illegal internet gambling activities and transactions.”

Alston and Bird, in the concluding part of the document state that the proposed regulation does not mention the fact that many foreign banks are located in jurisdictions where internet gambling is a legal activity, and thus there is no prohibition of the foreign bank accepting transactions involving internet gambling operations of what might be considered a restricted transaction in the US.

It says: “additionally, the proposed regulation does not address the attempt to impose US law on those foreign banks by including contract language that requires the foreign banks to not accept transactions that are unlawful in the US.”