[House Report 106-771]
[From the U.S. Government Printing Office]
106th Congress Rept. 106-771
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
UNLAWFUL INTERNET GAMBLING FUNDING PROHIBITION ACT
_______
July 20, 2000.--Ordered to be printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 4419]
[Including cost estimate of the Congressional Budget Office]
The Committee on Banking and Financial Services, to whom was
referred the bill (H.R. 4419) to prevent the use of certain
bank instruments for Internet gambling, and for other purposes,
having considered the same, report favorably thereon with
amendments and recommend that the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Unlawful Internet Gambling Funding
Prohibition Act''.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) Internet gambling is primarily funded through personal
use of bank instruments, including credit cards and wire
transfers.
(2) The National Gambling Impact Study Commission in 1999
recommended the passage of legislation to prohibit wire
transfers to Internet gambling sites or the banks which
represent them.
(3) Internet gambling is a major cause of debt collection
problems for insured depository institutions and the consumer
credit industry.
(4) Internet gambling conducted through offshore
jurisdictions has been identified by United States law
enforcement officials as a significant money laundering
vulnerability.
SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY BANK INSTRUMENT FOR UNLAWFUL
INTERNET GAMBLING.
(a) In General.--No person engaged in a gambling business may
knowingly accept, in connection with the participation of another
person in unlawful Internet gambling--
(1) credit, or the proceeds of credit, extended to or on
behalf of such other person (including credit extended through
the use of a credit card);
(2) an electronic fund transfer or funds transmitted by or
through a money transmitting business, or the proceeds of an
electronic fund transfer or money transmitting service, from or
on behalf of the other person;
(3) any check, draft, or similar instrument which is drawn by
or on behalf of the other person and is drawn on or payable at
or through any financial institution; or
(4) the proceeds of any other form of financial transaction
as the Secretary may prescribe by regulation which involves a
financial institution as a payor or financial intermediary on
behalf of or for the benefit of the other person.
(b) Definitions.--For purposes of this Act, the following definitions
shall apply:
(1) Bets or wagers.--The term ``bets or wagers''--
(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game predominantly
subject to chance, upon an agreement or understanding
that the person or another person will receive
something of greater value than the amount staked or
risked in the event of a certain outcome;
(B) includes the purchase of a chance or opportunity
to win a lottery or other prize (which opportunity to
win is predominantly subject to chance);
(C) includes any scheme of a type described in
section 3702 of title 28; and
(D) does not include--
(i) any bona fide business transaction
governed by the securities laws (as that term
is defined in section 3(a)(47) of the
Securities Exchange Act of 1934) for the
purchase or sale at a future date of securities
(as that term is defined in section 3(a)(10) of
such Act);
(ii) any transaction on or subject to the
rules of a contract market designated pursuant
to section 5 of the Commodity Exchange Act;
(iii) any over-the-counter derivative
instrument;
(iv) any contract of indemnity or guarantee;
(v) any contract for life, health, or
accident insurance; or
(vi) any participation in a simulation sports
game or an educational game or contest that--
(I) is not dependent solely on the
outcome of any single sporting event or
nonparticipant's singular individual
performance in any single sporting
event;
(II) has an outcome that reflects the
relative knowledge and skill of the
participants with such outcome
determined predominantly by accumulated
statistical results of sporting events;
and
(III) offers a prize or award to a
participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants.
(2) Gambling business.--The term ``gambling business''
means--
(A) a business that is conducted at a gambling
establishment;
(B) a business that--
(i) involves--
(I) the placing, receiving, or
otherwise making of bets or wagers; or
(II) the offering to engage in the
placing, receiving, or otherwise making
of bets or wagers;
(ii) involves 1 or more persons who conduct,
finance, manage, supervise, direct, or own all
or part of such business; and
(iii) has been or remains in substantially
continuous operation for a period in excess of
10 days or has a gross revenue of $2,000 or
more from such business during any 24-hour
period; and
(C) any agent who knowingly solicits for a business
described in subparagraph (A) or (B).
(3) Internet.--The term ``Internet'' means the international
computer network of interoperable packet switched data
networks.
(4) Unlawful internet gambling.--The term ``unlawful Internet
gambling'' means to place, receive, or otherwise make a bet or
wager by any means which involves the use, at least in part, of
the Internet where such bet or wager is unlawful under any
applicable Federal or State law in the State in which the bet
or wager is initiated, received, or otherwise made.
(5) Other terms.--
(A) Credit; creditor; and credit card.--The terms
``credit'', ``creditor'', and ``credit card'' have the
meanings given such terms in section 103 of the Truth
in Lending Act.
(B) Electronic fund transfer.--The term ``electronic
fund transfer''--
(i) has the meaning given such term in
section 903 of the Electronic Fund Transfer
Act; and
(ii) includes any fund transfer covered by
Article 4 of the Uniform Commercial Code, as in
effect in any State.
(C) Financial institution.--The term ``financial
institution'' has the meaning given such term in
section 903 of the Electronic Fund Transfer Act.
(D) Money transmitting business and money
transmitting service.--The terms ``money transmitting
business'' and ``money transmitting service'' have the
meanings given such terms in section 5330(d) of title
31, United States Code.
(E) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(c) Civil Remedies.--
(1) Jurisdiction.--The district courts of the United States
shall have original and exclusive jurisdiction to prevent and
restrain violations of this section by issuing appropriate
orders in accordance with this section, regardless of whether a
prosecution has been initiated under this section.
(2) Proceedings.--
(A) Institution by federal government.--
(i) In general.--The United States, acting
through the Attorney General, may institute
proceedings under this subsection to prevent or
restrain a violation of this section.
(ii) Relief.--Upon application of the United
States under this subparagraph, the district
court may enter a preliminary injunction or an
injunction against any person to prevent or
restrain a violation of this section, in
accordance with Rule 65 of the Federal Rules of
Civil Procedure.
(B) Institution by state attorney general.--
(i) In general.--The attorney general of a
State (or other appropriate State official) in
which a violation of this section allegedly has
occurred or will occur may institute
proceedings under this subsection to prevent or
restrain the violation.
(ii) Relief.--Upon application of the
attorney general (or other appropriate State
official) of an affected State under this
subparagraph, the district court may enter a
preliminary injunction or an injunction against
any person to prevent or restrain a violation
of this section, in accordance with Rule 65 of
the Federal Rules of Civil Procedure.
(C) Indian lands.--Notwithstanding subparagraphs (A)
and (B), for a violation that is alleged to have
occurred, or may occur, on Indian lands (as that term
is defined in section 4 of the Indian Gaming Regulatory
Act)--
(i) the United States shall have the
enforcement authority provided under
subparagraph (A); and
(ii) the enforcement authorities specified in
an applicable Tribal-State compact negotiated
under section 11 of the Indian Gaming
Regulatory Act shall be carried out in
accordance with that compact.
(3) Expedited proceedings.--
(A) In general.--In addition to any proceeding under
paragraph (2), a district court may, in exigent
circumstances, enter a temporary restraining order
against a person alleged to be in violation of this
section upon application of the United States under
paragraph (2)(A), or the attorney general (or other
appropriate State official) of an affected State under
paragraph (2)(B), in accordance with Rule 65(b) of the
Federal Rules of Civil Procedure.
(d) Criminal Penalty.--
(1) In general.--Whoever violates this section shall be fined
under title 18, United States Code, or imprisoned for not more
than 5 years, or both.
(2) Permanent injunction.--Upon conviction of a person under
this subsection, the court may enter a permanent injunction
enjoining such person from placing, receiving, or otherwise
making bets or wagers or sending, receiving, or inviting
information assisting in the placing of bets or wagers.
(e) Safe Harbor for Financial Intermediaries.--
(1) In general.--No creditor, credit card issuer, financial
institution, operator of a terminal at which an electronic fund
transfer may be initiated, money transmitting business, or
national, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, or money
transmitting service shall be liable under this section for the
involvement of such person, or the use of the facilities of
such person--
(A) in any credit transaction, electronic fund
transfer, or money transmitting service described in
subsection (a); or
(B) in drawing, paying, transferring, or collecting
any check, draft, or other instrument described in
subsection (a) or in any regulation prescribed under
such subsection.
(2) Exception for knowing participation in a gambling
business.--Paragraph (1) shall not apply with respect to any
person referred to in such paragraph which is a gambling
business or which knowingly participates in any activity
referred to in subparagraph (A) or (B) of such paragraph as an
agent or representative of a gambling business.
SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN JURISDICTIONS.
(a) In General.--In deliberations between the United States
Government and any other country on money laundering, corruption, and
crime issues, the United States Government should--
(1) encourage cooperation by foreign governments and relevant
international fora in identifying whether Internet gambling
operations are being used for money laundering, corruption, or
other crimes;
(2) advance policies that promote the cooperation of foreign
governments, through information sharing or other measures, in
the enforcement of this Act; and
(3) encourage the Financial Action Task Force on Money
Laundering, in its annual report on money laundering
typologies, to study the extent to which Internet gambling
operations are being used for money laundering.
(b) Report Required.--The Secretary of the Treasury shall submit an
annual report to the Congress on the deliberations between the United
States and other countries on issues relating to Internet gambling.
SEC. 5. ENFORCEMENT ACTIONS.
Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is
amended by adding at the end the following new subsection:
``(x) Depository Institution Involvement in Internet Gambling.--
Notwithstanding section 3(e) of the Unlawful Internet Gambling Funding
Prohibition Act, if any appropriate Federal banking agency determines
that any insured depository institution is engaged in any of the
following activities, the agency may issue an order to such institution
prohibiting such institution from continuing to engage in any of the
following activities:
``(1) Extending credit, or facilitating an extension of
credit, electronic fund transfer, or money transmitting service
with the actual knowledge that any person is violating section
3(a) of the Unlawful Internet Gambling Funding Prohibition Act
in connection with such extension of credit, electronic fund
transfer, or money transmitting service.
``(2) Paying, transferring, or collecting on any check,
draft, or other instrument drawn on any depository institution
with the actual knowledge that any person is violating section
3(a) of the Unlawful Internet Gambling Funding Prohibition Act
in connection with such check, draft, or other instrument.''.
Amend the title so as to read:
A bill to prevent the use of certain bank instruments for
unlawful Internet gambling.
Background and Need for Legislation
In recent years, gambling activities have proliferated over
the Internet. Over 850 sites of offer real-time live gambling
over the Internet, and it is estimated that in 1999, Internet
gambling revenue reached $1.2 billion. In testimony before the
Committee, the Department of Justice reported that the Internet
and other new technologies have made possible types of gambling
that were not feasible a few years ago. For example, a U.S.
citizen can now log on from his living room and participate in
an interactive Internet poker game operated from a computer
located in Antigua.
The Internet manifests new challenges to designing balanced
public policy for gambling activities. Broad public policy
concerns with respect to Internet gambling include the absence
of regulation, accessibility by minors, and susceptibility to
criminal activity.
Absence of Regulation
State law has largely shaped legalized gambling in this
country. However, there is no regulatory infrastructure for
Internet gambling as there is for traditional gambling
activities. The nature of the Internet allows gambling sites to
escape protections imposed by State gaming commissions on
gambling business such as registration and licensing of gaming
operations, inspection of gaming equipment, and strict
accounting standards.
In this regard, the National Gambling Impact Study
Commission (the ``Commission'') Report, released in June 1999,
stated that because Internet gambling crosses state lines, it
is difficult for states to adequately monitor and regulate such
gambling. The Commission examined the possibility of regulating
on-line gambling activities using today's casino regulation as
a model. However, the Commission rejected this approach due to
technical and legal questions. Thus, the Commission recommended
that the federal government prohibit, without new or expanded
exemptions, Internet gambling and develop appropriate gambling
enforcement strategies.
Similarly, in testimony before the Committee, the National
Association of Attorneys General (``NAAG'') stated that
Internet gambling is one of the few instances where the states
have actively promoted and supported the adoption of Federal
law to combat such an issue. NAAG stated that ``the somewhat
unique nature of our support reflects the importance of federal
legislation to aid the states' general efforts to control
gambling activity that occurs within our borders.''
Accessibility by Minors
Protections under state gambling laws encompass the goal of
providing gambling in a controlled environment, which among
other things prevents gambling by minors. In discord with this
goal, the Internet defies time and place restrictions by
offering gambling at home at any hour, with little insurance
against accessibility by minors. The Commission reports that
most sites rely on the registrant to disclose his or her
correct age and makes little or no effort to verify the
accuracy of the information.
The National Collegiate Athletic Association's testimony
before the Committee stated that the emergence of Internet
gambling enables students to wager behind closed doors in
virtual anonymity, which provides a multitude of new
opportunities for young people to gamble on college sports.
NCAA institutions note that the growing consensus of research
that reveals rates of pathological and problem gambling among
college students that are three times higher than the adult
population.
Susceptibility to Criminal Activity
The dual protection of anonymity and encryption provided by
the Internet raises a host of issues regarding criminal
activities. The National Gambling Impact Study Commission
Report states that problems associated with Internet gambling
include: 1) the potential for abuse by gambling operators who
can alter, move, or entirely remove sites within minutes; 2)
the ability of computer hackers or gambling operators to tamper
with gambling software to manipulate games to their benefit;
and 3) the provision of an additional means for individuals to
launder money.
Purpose and Summary
The purpose of this legislation is to make it unlawful for
a gambling business to accept a bank instrument in connection
with unlawful Internet gambling. In addition, H.R. 4419
provides that, in deliberations between the U.S. and any other
country on money laundering, corruption, and crime issues, the
U.S. should advance policies that promote the cooperation of
foreign governments in the enforcement of this legislation.
Hearings
On June 20, 2000, the full Committee held a hearing to hear
testimony on the legislation. Testifying at the hearing were:
The Honorable Ernest L. Fletcher; Gregory A. Baer, Assistant
Secretary for Financial Institutions, Department of the
Treasury; Kevin V. Di Gregory, Deputy Assistant Attorney
General, Crime Division, Department of Justice; Alan Kesner,
Assistant Attorney General, Wisconsin Department of Justice, on
behalf of the National Association of Attorneys General;
Richard Leone, President, The Century Foundation, and former
Commissioner on the National Gambling Impact Study Commission;
Daniel Nestel, Assistant Director of Federal Relations, The
National Collegiate Athletic Association; Alexander Ingle,
Chief Financial Officer, New York Racing Association, Inc.
Committee Consideration and Votes
(Rule XI, Clause 2(l)(2)(B))
On June 28, 2000, the Committee met in open session to mark
up H.R. 4419, the ``Internet Gambling Funding Prohibition
Act.'' During the markup, the Committee approved, by voice
vote, two amendments to H.R. 4419. With a quorum being present,
a motion to adopt and favorably report H.R. 4419, as amended,
to the House was approved by voice vote.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform and Oversight Findings
As provided for in clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, no oversight findings have
been submitted to the Committee by the Committee on Government
Reform.
Constitutional Authority
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, the Constitutional Authority
of Congress to enact this legislation is derived from Article
I, section 8, clause 1 (relating to the general welfare of the
United States): Article I, section 8, clause 3 (relating to
Congressional power to regulate commerce); Article I, section
8, clause 5 (relating to the power ``to coin money'' and
``regulate the value thereof''); and Article I, section 8,
clause 18 (relating to making all laws necessary and proper for
carrying into execution powers vested by the Constitution in
the government of the United States).
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Congressional Accountability Act
The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (P.L. 104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.
Congressional Budget Office Cost Estimate and Unfunded Mandates
Analysis
The cost estimate pursuant to clause 3(c)(3) of rule XIII
of the Rules of the House of Representatives and section 402 of
the Congressional Budget Act of 1974 is attached herewith:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 17, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4419, the Internet
Gambling Funding Prohibition Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark Hadley.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
H.R. 4419--Internet Gambling Funding Prohibition Act
Summary: H.R. 4419 would prohibit gambling businesses from
accepting credit cards and other bank instruments from gamblers
who illegally bet over the Internet. The bill also would
authorize the agencies that regulate insured depository
institutions to issue cease-and-desist orders against
institutions that knowingly facilitate Internet gambling. The
Office of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (FDIC), the Office of Thrift Supervision
(OTS), and the National Credit Union Administration (NCUA)
would enforce the provisions of H.R. 4419 as they apply to
financial institutions.
CBO estimates that implementing this legislation would
result in no significant cost to the federal government.
Because enactment of H.R. 4419 could affect spending and
receipts, pay-as-you-go procedures would apply to the bill.
However, CBO estimates that any impact on direct spending and
receipts would not be significant.
Although H.R. 4419 would prohibit gambling businesses from
accepting credit card payments and other bank instruments from
gamblers who bet illegally over the Internet, the bill would
not create a new intergovernmental or private-sector mandate.
Under current federal and state law, gambling businesses are
generally prohibited from accepting bets or wagers over the
Internet. Thus, H.R. 4419 does not contain a new mandate
relative to current law.
Estimated cost to the Federal Government: CBO estimates
that the government would incur no significant costs to
implement H.R. 4419.
Basis of estimate
CBO estimates that implementing H.R. 4419 would increase
administrative costs of the Department of Justice and the NCUA,
but any such costs would be negligible. The bill also would
have a small effect on the operating costs of the FDIC and the
Federal Reserve System. Finally, the bill would have a
negligible effect on the collection and spending of criminal
penalties.
Spending subject to appropriation
Because H.R. 4419 would establish a new federal crime
relating to Internet gambling, the federal government would be
able to pursue cases that it otherwise would not be able to
prosecute. CBO expects, however, that most cases would be
pursued under state law. Therefore, we estimate that any
increase in federal costs for law enforcement, court
proceedings, or prison operations would not be significant. Any
such additional costs would be subject to the availability of
appropriated funds.
H.R. 4419 would require the Department of Justice to submit
an annual report on deliberations with other countries on
issues related to Internet gambling. CBO estimates that
preparing and completing the report would cost less than
$100,000 a year, subject to the availability of appropriated
funds.
Because we expect few cease-and-desist orders would be
issued. CBO estimates that implementing H.R. 4419 would
increase the costs of the NCUA by less than $200,000 a year
over the 2001-2005 period.
Direct spending and revenues
Both the OTS and the OCC charge fees to cover all their
administrative costs; therefore, any additional spending by
these agencies to implement the bill would have no net
budgetary effect. That is not the case with the FEC, however,
which uses deposit insurance premiums paid by all banks to
cover the expenses it incurs to supervise state-chartered
banks.
The bill would cause a small increase in FDIC spending, but
would not affect its premium income. In total, CBO estimates
that H.R. 4419 would increase direct spending and offsetting
receipts of the OTS, OCC, and FCC by less than $500,000 a year
over the 2001-2005 period. Budgetary effects on the Federal
Reserve are recorded as changes in revenues (governmental
receipts). Based on information from the Federal Reserve, CBO
estimates that enacting H.R. 4419 would reduce such revenues by
less than $500,000 a year over the 2001-2005 period.
Because those prosecuted and convicted under the bill could
be subject to criminal fines, the federal government might
collect additional fines if the bill is enacted. Collections of
such fines are recorded in the budget as government receipts
(i.e., revenues), which are deposited in the Crime Victims Fund
and spent in subsequent years. Any additional collections are
likely to be negligible because of the small number of cases
involved. Because any increase in direct spending would equal
the amount of fines collected (with a lag of one year or more),
the additional direct spending also would be negligible.
Pay-as-you-go considerations: The Balance Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. Enacting
H.R. 4419 could affect both direct spending and receipts, but
CBO estimates that any such effects would be negligible.
Intergovernmental and private-sector impact: Although H.R.
4419 would prohibit gambling businesses from accepting credit
card payments and other bank instruments from gamblers who bet
illegally over the Internet, the bill would not create a new
intergovernmental mandate. Under current federal and state law,
gambling businesses are generally prohibited from accepting
bets or wagers over the Internet. Thus, H.R. 4419 does not
contain a new mandate relative to current law.
H.R. 4419 would authorize federal banking regulators to
require depository institutions that have knowingly
participated in transactions with unlawful Internet gambling
businesses to cease doing so. This provision would not create a
new private-sector mandate for depository institutions because
federal banking regulators already have such powers under
current law.
Previous CBO estimate: CBO estimated the costs of two other
bills related to Internet gambling. On May 1, 2000, CBO
transmitted a cost estimate for H.R. 3125, the Internet
Gambling Prohibition Act of 2000, as ordered reported by the
House Committee on the Judiciary on April 6, 2000. On July 15,
1999, CBO transmitted a cost estimate for S. 692, the Internet
Gambling Prohibition Act of 1999, as reported by the Senate
Committee on the Judiciary on June 17, 1999. Both bills would
prohibit gambling conducted over the Internet, and neither bill
would result in any significant cost to the federal government.
Estimate prepared by: Federal costs: Mark Hadley; revenues:
Carolyn Lynch; impact on State, local, and tribal governments:
Shelley Finlayson; and impact on the private sector: John
Harris.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
Section-by-Section Analysis
Section 1. Short title
This Act may be cited as the ``Unlawful Internet Gambling
Funding Prohibition Act.''
Section 2. Findings
Congressional findings include: (1) the role that Internet
gambling funded through the use of bank instruments plays in
the creation of ultimately uncollectible personal debt, and (2)
the susceptibility of Internet gambling to abuse by money
launderers.
Section 3. Prohibition on acceptance of any bank instrument for
Internet gambling
This section prohibits a gambling business from accepting
bank instruments in connection with unlawful Internet gambling.
Covered instruments include credit cards, electronic fund
transfers, and checks.
Subsection (b) defines the term ``bets or wagers'' a the
staking or risking by any person of something of value upon the
outcome of a contest of others, a sporting event, or a game
predominantly subject to chance with the agreement that the
winner will receive something of greater value than the amount
staked or risked. This subsection clarifies that ``bets or
wagers'' does not include a bona fide business transaction
governed by the securities laws; a transaction subject to the
Commodities Exchange Act; an over-the- counter derivatives
instrument; a contract of indemnity or guarantee; an contract
for life, health, or accident insurance; or certain
participation in a simulation sports game of education game.
Subsection(b) also defines the terms ``gambling business,
'' ``Internet, '' and ``unlawful Internet gambling.''
Subsection (c) authorizes civil remedies, including a
preliminary injunction or injunction against any person to
prevent or restrain a violation of this Act.
Subsection (d) authorizes criminal penalties, including
fines or imprisonment for not more than five years or both.
Subsection (e) provides that a financial
intermediary(creditor, credit card issues, financial
institution, operator of a terminal a which an electronic fund
transfer may be initiated, money transmitting business, or
national, regional, or local network) shall not be liable for
the involvement of a financial intermediary or the use of the
facilities of the financial intermediary in connection with a
transaction under this Act. However, the subsection specifies
that the safe harbor does not apply to a financial intermediary
that engaged in a transaction as an agent of a gamble business
knowing that the transaction is in violation of this Act.
The purpose of subsection (e) is to ensure that a financial
intermediary is not held liable for a violation of this Act
solely based on the unknowing and unintentional involvement of
the intermediary through the use of the facilities of such
intermediary in an unlawful Internet gamble transaction, unless
the intermediary acted as an agent of a gambling business and
had: (1) actual knowledge that the specific transaction is an
unlawful Internet gambling transaction; and (2) the intent to
engage in the business of submitting into the payment system
Internet Gambling transactions prohibited by this Act.
Section 4. Internet gambling in or through foreign jurisdictions
Section 4 provides that, in deliberations between the U.S.
Government any other country on money laundering, corruption,
and crime issues, the U.S. Government should encourage
cooperation by foreign governments in identifying whether
Internet gambling operations are being used for money
laundering, corruption, or other crimes, advance policies that
promote the cooperation by foreign governments in the
enforcement of this Act; and encourage the Financial Action
Task Force on Money Laundering to study the extent to which
Internet gambling operations are being used for money
laundering.
Section 5. Enforcement actions
This section provides that a Federal banking agency may
take appropriate enforcement action against an institution that
knowingly permitted its payment or credit facilities to be used
in connection with Internet gambling activity that violates
this Act.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SECTION 8 OF THE FEDERAL DEPOSIT INSURANCE ACT
Sec. 8. (a) * * *
* * * * * * *
(x) Depository Institution Involvement in Internet
Gambling.--Notwithstanding section 3(e) of the Unlawful
Internet Gambling Funding Prohibition Act, if any appropriate
Federal banking agency determines that any insured depository
institution is engaged in any of the following activities, the
agency may issue an order to such institution prohibiting such
institution from continuing to engage in any of the following
activities:
(1) Extending credit, or facilitating an extension of
credit, electronic fund transfer, or money transmitting
service with the actual knowledge that any person is
violating section 3(a) of the Unlawful Internet
Gambling Funding Prohibition Act in connection with
such extension of credit, electronic fund transfer, or
money transmitting service.
(2) Paying, transferring, or collecting on any check,
draft, or other instrument drawn on any depository
institution with the actual knowledge that any person
is violating section 3(a) of the Unlawful Internet
Gambling Funding Prohibition Act in connection with
such check, draft, or other instrument.