Unlawful Internet Gambling Enforcement Act Policy & Procedures
Introduction
The Department of the Treasury and the Federal Reserve Board (Agencies) has issued a joint final rule to implement the Unlawful Internet Gambling Enforcement Act. The Act "prohibits any person engaged in the business of betting or wagering (as defined in the Act) from knowingly accepting payments in connection with the participation of another person in unlawful Internet gambling." (Regulation GG – UIGEA)
Purpose
The purpose of this policy is to prevent unlawful Internet gambling businesses from utilizing the banking system. The Bank of Delmarva ("the Bank") established this written policy and procedures to screen and prevent unlawful Internet gambling businesses (casinos and others) from opening an account at the bank. It is further designed to identify and block or otherwise prevent or prohibit restricted transactions. A “restricted transaction” is defined as a transaction or transmittal involving any credit, funds, instrument, or proceeds that the Act prohibits any person engaged in the business of betting or wagering from knowingly accepting in connection with the participation of another person in unlawful internet gambling. Restricted transactions generally include, but not limited to, those in which credit, electronic fund transfers, checks, or drafts are knowingly accepted by gambling businesses in connection with the participation by others in unlawful internet gambling.
Policy
The rule focuses on screening for unlawful Internet gambling businesses at the time of account opening. If unlawful Internet gambling businesses are prevented from accessing the banking system, then they will not be able to make or receive payments using checks, credit or debit cards, wires, or ACH payments.
Card Transactions
Under the rule, the Bank is not required to monitor or determine whether its customer is a gambler except that it must ensure that unlawful credit and debit card transactions are blocked. The Bank’s card network FIS Global assigns a Merchant Category Code to transactions it identifies as online wagers. Regulatory blocks have been put in place by VISA/MasterCard and managed at the association level. All transactions with this code to identify and block unlawful transactions, and the payments will be denied. The Bank is not required to block ACH, wire, or check payments (payments from its customers' accounts) related to unlawful Internet gambling to be in compliance with the Final Rule.
New Account Screening
The rule focuses only on due diligence on accounts that are held directly for commercial customers. This due diligence will be performed in conjunction with existing account opening processes that are already required with the Bank Secrecy Act. The following steps are to be taken during the account opening process:
- Determine whether the account is for an individual or commercial customer.
- For accounts determined to be for individuals, no further steps are required.
- For commercial accounts where the bank determines there is "minimal risk" of it being an Internet casino, no further steps are required.
- As part of the workflow process for new commercial accounts opened, question is posed to the authorized party regarding the business practice related to Unlawful Internet Gambling. The following statement prints on the “Account Information” document (signature card), “Customer does not engage in internet gambling”. Authorized party or parties sign this document as agreement to the statement. New commercial account customers are given a Truth In Savings Account (TISA) disclosure at account opening which includes a statement under UIGEA in addition to a separate UIGEA new account disclosure. No further steps are required.
- For commercial accounts that do engage in Internet gambling business, they must provide evidence of their legal authority to do so, or a legal opinion, and a third party certification of its age and location verification procedures (to ensure that restrictions on minors and geographic legalities are observed). This step places the burden of proving that that the Internet gambling entity is operating legally on the casino itself and its governing authorities.
When existing commercial customers wish to open additional accounts, the Bank will rely upon information learned from the existing relationship to help determine the risk level associated with that established customer.
Remedial Action
When the Bank has "actual knowledge" that one of their commercial customers is participating in restricted transactions, the Bank may include, but are not limited to:
- Warning the customer and educating them as to why the transaction was blocked, verbally or in writing.
- Deny a customer access to a payment system.
- Close the account of the customer immediately.
- “Actual knowledge” is gained when the Bank knows or receives a report from a governmental entity such as a law enforcement or regulatory agency that a commercial account is processing restricted transactions.
The "actual knowledge" standard is met when a particular fact with regard to a commercial customer is known by or brought to the attention of the BSA/AML/Security Officer, Deposit Compliance Officer or a Senior officer of the Bank.
Discovery of restricted and unlawful gambling may initiate a Suspicious Activity Report (SAR) filing with the Bank Secrecy Act (BSA) Officer.
Updated 03/2020; 03/2023