Internet gambling, credit cards and money laundering
| DOI | https://doi.org/10.1108/13685200310809428 |
| Date | 01 January 2003 |
| Pages | 57-65 |
| Published date | 01 January 2003 |
| Author | Paul Hugel,Joseph Kelly |
| Subject Matter | Accounting & finance |
Internet Gambling, Credit Cards and
Money Laundering
Paul Hugel and Joseph Kelly
INTRODUCTION
Internet gambling has of course become increasingly
common to our world. Predictably, Internet oshore
betting companies are heavily reliant on credit cards
and credit card transactions in accepting bets from
gamblers. Certain countries have taken or are consid-
ering taking measures to eliminate credit card trans-
actions with oshore operators, and this might
result in an increase in suspicious transactions.
The UK and the USA have taken opposite posi-
tions on the issue of Internet gambling (regulation
vs prohibition). Typical of the British approach
would be the recommendation of the Budd
Report, July 2001 that `online gaming should be
permitted'.
1
The Budd Report also recommended
that only those online sites licensed by British
regulatory authorities `should be permitted to adver-
tise in Great Britain'.
2
Besides additional stringent
regulations/recommendations, the Budd Report
stated:
`as an anti-money laundering measure, it is essential
that punters should be paid any winnings or the
balance of their account in the same way in
which the money was originally deposited. Pun-
ters gambling on line will generally use debit or
credit cards, although an account could be
opened with a cheque (as long as it is from an
account held by the person opening the online
account). Operators should pay any money back
on to the card from which the original payment
was made or send a cheque in the name of the
account holder. We recommend that on-line operators
should make any payments only to the debit or credit
card used to make deposits into the punter's account, or
by cheque to the punter.'
3
(italics in original)
Other jurisdictions, such as Antigua, Alderney and
the Isle of Man have drafted regulations that prohibit
Internet operators from accepting cash and require
they `know' the player so as to prevent or minimise
any suspicious transaction.
The USA, unlike the UK, maintains that it is ille-
gal for an oshore operator to accept wagers from the
USA. Unlike the UK, states as well as the federal
government may take legal action against oshore
operators or suppliers. One publicised example is
the action of the Attorney General of New Jersey,
who in 2001 took civil action against eight oshore
betting operators (October 2001) and suppliers and
three oshore casinos (June 2001). On 23rd April,
2002 New Jersey reached a settlement agreement in
one complaint with Cryptologic Inc., a Canadian
supplier
4
and William Hill Casino NV. In sum,
defendants admitted no liability, but agreed `that
they will use their best eorts to prevent current cus-
tomers and/or licensees from accepting Internet
sports bets from persons located within New Jersey,
unless and until it becomes legal to do so.'
5
One
almost unnoticed cause of action
6
in all 11 complaints
was based on s. 2 of the Statute of Queen Ann,
7
which is still the law in about 15 states, but has
long been abolished in the UK. Section 2 of the
Statute allows a loser to recover gambling debts
within a speci®ed time Ð usually three to six
months, but if the loser does not, then some other
party `without covin or collusion' (see ref. 7) might
sue in place of the loser and recover the loss or, in
some states, treble the amount of the loss.
This type of recovery may become increasingly
popular concerning Internet gaming debts because
the operators of Internet gaming sites typically do
not extend credit to players, instead requiring pre-
existing accounts funded by credit card or wire trans-
fer. Indeed, in most suits involving debt incurred via
Internet gambling losses, the gaming operators are
not even named as parties.
8
These suits typically
involve claims by players against the issuers of the
credit cards which they use to fund their gambling
account.
The fact that Internet gaming sites are virtually all
based outside the USA (often very far outside the
USA)
9
and operate in a questionable legal environ-
ment goes a long way towards explaining why
disgruntled players have little choice but to ®nd
someone else to sue to recover their losses. An equally
important reason may be that, until very recently,
such sites were almost exclusively operated by small
Page 57
Journal of Money Laundering Control Ð Vol. 6 No. 1
Journalof Money Laundering Control
Vol.6, No. 1, 2002, pp. 57± 65
#HenryStewart Publications
ISSN1368-5201
To continue reading
Request your trial