As online gambling continues to grow, the government has begun to take action against those engaged in illegal activity. Several jurisdictions have banned online casinos, and the U.S. has a number of federal criminal statutes that are relevant to the problem. The Federal Bureau of Investigation (FBI) has warned PayPal that it could face prosecution.
For instance, the Travel Act, which is primarily a transportation law, applies to players who use an interstate facility for unlawful activities. In the case of online gambling, that would include playing online, betting on the Internet, and receiving bets in cyberspace.
Other notable laws, such as the Bank Secrecy Act, require banks to report transactions over $10,000. Casinos were also required to file large cash transaction reports. However, these are not the only laws that apply to the problem. Moreover, the FBI has identified an increased risk of money laundering resulting from the proliferation of online gambling.
A number of states have passed laws governing online gambling, including New York, Connecticut, and New Jersey. These state laws will likely complicate the regulatory expectations of online gambling providers. Despite the fact that a number of other states have legalized gambling, many others have taken a more cautious approach. Some have adopted rules allowing casinos to offer online gaming while prohibiting sports betting and lottery sales.
Another important law to consider is the Unlawful Internet Gambling Enforcement Act, or UIGEA. This is a law that was enacted in response to the proliferation of Internet poker sites. It has a number of elements to weed out low-level cases. Among the most important is the source of funds verification. If an online casino is aware of the source of a customer’s gambling money, they will have a better chance of avoiding money laundering efforts and account takeover attacks.
One of the biggest challenges with implementing the UIGEA has been how to identify and verify users. Some companies choose to rely on self-exclusion lists to prevent customers from accessing their online gambling sites again. Others want to conduct more in-depth checks and may want to terminate access to customers with suspicious past histories.
The best practice for this kind of thing is to do a thorough audit and review of all aspects of the business, especially AML and compliance operations. Conducting an external audit on a regular basis is also a good idea. Additionally, checking for self-exclusion lists will help ensure that the company isn’t running afoul of the various regulations and laws that affect online gambling.
Another interesting UIGEA-related measure is the requirement for an Internet gambling license. This is similar to the requirements of a land-based gambling license, and is often used as a form of protection for operators. Several states, including Pennsylvania, have established licensing agencies to oversee the process. Online gambling operators can use the license to advertise and promote their services.
On a more positive note, the government has seized assets in several cases. A monetary fine is another measure that is frequently used by federal authorities. An example is the $3.2 million seized from Discovery Communications after accepting ads for Tropical Paradise, a Costa Rican casino operation.