US issues final rule to implement UIGEA

The US Treasury and Federal Reserve yesterday issued the joint final rule to implement the Unlawful Internet Gambling Enforcement Act. It will require "US financial firms that participate in designated payment systems to establish and implement policies that are reasonably designed to prevent payments to businesses in connection with unlawful Internet gambling".

Companies have until 1 December 2009 to comply with the new rule.

The news comes days after Barney Frank, chairman of the House Financial Services Committee, called on US Treasury Secretary Henry Paulson to delay the issuing of the rule because of the lack of definition as to what constitutes unlawful internet gambling and the burden it will place on US financial institutions “at a time of economic crisis”. Republican lawmakers have been pressuring the Bush administration to implement these rules before leaving office in January next year.

Payments made through credit cards, electronic fund transfers and cheques will all be affected. According to the Treasury’s statement, “the rule provides non-exclusive examples of such policies and procedures and sets out the regulatory enforcement framework. For the purposes of the rule, unlawful Internet gambling generally would cover the making of a bet or wager that involves use of the Internet and that is unlawful under any applicable federal or state law in the jurisdiction where the bet or wager is initiated, received, or otherwise made.”

Frank said the administration of president-elect Barack Obama should be left to decide whether to implement UIGEA. He said: "This midnight rulemaking will tie the hands of the new administration, burden the financial services industry at a time of economic crisis and contradict the stated intent of the Financial Services Committee. Furthermore, some of the information needed to make this determination would likely be unavailable to banks because customers or financial institutions in foreign jurisdictions will likely be unwilling or unable to provide it."

While acknowledging that the new rule was more than a year late in being brought out, Spencer Bachus, Republican representative for Alabama, told Reuters: “No longer will the offshore gambling interests benefit from any turning any computer into a casino that is available every minute of the day."