108TH CONGRESS

1ST SESSION H. R. 2143

AN ACT

To prevent the use of certain bank instruments for

unlawful Internet gambling, and for other purposes.

108TH CONGRESS

1ST SESSION H. R. 2143

AN ACT

To prevent the use of certain bank instruments for unlawful

Internet gambling, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Unlawful Internet

3 Gambling Funding Prohibition Act’’.

4 SEC. 2. FINDINGS.

5 The Congress finds as follows:

6 (1) Internet gambling is primarily funded

7 through personal use of bank instruments, including

8 credit cards and wire transfers.

9 (2) The National Gambling Impact Study Com10 mission in 1999 recommended the passage of legisla11 tion to prohibit wire transfers to Internet gambling

12 sites or the banks which represent them.

13 (3) Internet gambling is a major cause of debt

14 collection problems for insured depository institu15 tions and the consumer credit industry.

16 (4) Internet gambling conducted through off17 shore jurisdictions has been identified by United

18 States law enforcement officials as a significant

19 money laundering vulnerability.

20 SEC. 3. POLICIES AND PROCEDURES REQUIRED TO PRE21 VENT PAYMENTS FOR UNLAWFUL INTERNET

22 GAMBLING.

23 (a) REGULATIONS.—Before the end of the 6-month

24 period beginning on the date of the enactment of this Act,

25 the Federal functional regulators shall prescribe regula26 tions requiring any designated payment system to estab-
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1 lish policies and procedures reasonably designed to iden2 tify and prevent restricted transactions in any of the fol3 lowing ways:

4 (1) The establishment of policies and proce5 dures that—

6 (A) allow the payment system and any per7 son involved in the payment system to identify

8 restricted transactions by means of codes in au9 thorization messages or by other means; and

10 (B) block restricted transactions identified

11 as a result of the policies and procedures devel12 oped pursuant to subparagraph (A).

13 (2) The establishment of policies and proce14 dures that prevent the acceptance of the products or

15 services of the payment system in connection with a

16 restricted transaction.

17 (b) REQUIREMENTS FOR POLICIES AND PROCE18 DURES.—In prescribing regulations pursuant to sub19 section (a), the Federal functional regulators shall—

20 (1) identify types of policies and procedures, in21 cluding nonexclusive examples, which would be

22 deemed to be ‘‘reasonably designed to identify’’ and

23 ‘‘reasonably designed to block’’ or to ‘‘prevent the

24 acceptance of the products or services’’ with respect

25 to each type of transaction, such as, should credit
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1 card transactions be so designated, identifying trans2 actions by a code or codes in the authorization mes3 sage and denying authorization of a credit card

4 transaction in response to an authorization message;

5 (2) to the extent practical, permit any partici6 pant in a payment system to choose among alter7 native means of identifying and blocking, or other8 wise preventing the acceptance of the products or

9 services of the payment system or participant in con10 nection with, restricted transactions; and

11 (3) consider exempting restricted transactions

12 from any requirement under subsection (a) if the

13 Federal functional regulators find that it is not rea14 sonably practical to identify and block, or otherwise

15 prevent, such transactions.

16 (c) COMPLIANCE WITH PAYMENT SYSTEM POLICIES

17 AND PROCEDURES.—A creditor, credit card issuer, finan18 cial institution, operator of a terminal at which an elec19 tronic fund transfer may be initiated, money transmitting

20 business, or international, national, regional, or local net21 work utilized to effect a credit transaction, electronic fund

22 transfer, or money transmitting service, or a participant

23 in such network, meets the requirement of subsection (a)

24 if—
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1 (1) such person relies on and complies with the

2 policies and procedures of a designated payment sys3 tem of which it is a member or participant to—

4 (A) identify and block restricted trans5 actions; or

6 (B) otherwise prevent the acceptance of

7 the products or services of the payment system,

8 member, or participant in connection with re9 stricted transactions; and

10 (2) such policies and procedures of the des11 ignated payment system comply with the require12 ments of regulations prescribed under subsection

13 (a).

14 (d) ENFORCEMENT.—

15 (1) IN GENERAL.—This section shall be en16 forced by the Federal functional regulators and the

17 Federal Trade Commission under applicable law in

18 the manner provided in section 505(a) of the

19 Gramm-Leach-Bliley Act.

20 (2) FACTORS TO BE CONSIDERED.—In consid21 ering any enforcement action under this subsection

22 against any payment system, or any participant in

23 a payment system that is a creditor, credit card

24 issuer, financial institution, operator of a terminal at

25 which an electronic fund transfer may be initiated,
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1 money transmitting business, or international, na2 tional, regional, or local network utilized to effect a

3 credit transaction, electronic fund transfer, or money

4 transmitting service, or a participant in such net5 work, the Federal functional regulators and the Fed6 eral Trade Commission shall consider the following

7 factors:

8 (A) The extent to which such person is ex9 tending credit or transmitting funds knowing

10 the transaction is in connection with unlawful

11 Internet gambling.

12 (B) The history of such person in extend13 ing credit or transmitting funds knowing the

14 transaction is in connection with unlawful

15 Internet gambling.

16 (C) The extent to which such person has

17 established and is maintaining policies and pro18 cedures in compliance with regulations pre19 scribed under this subsection.

20 (D) The feasibility that any specific rem21 edy prescribed can be implemented by such per22 son without substantial deviation from normal

23 business practice.

24 (E) The costs and burdens the specific

25 remedy will have on such person.
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1 SEC. 4. DEFINITIONS.

2 For purposes of this Act, the following definitions

3 shall apply:

4 (1) RESTRICTED TRANSACTION.—The term ‘‘re5 stricted transaction’’ means any transaction or

6 transmittal to any person engaged in the business of

7 betting or wagering, in connection with the partici8 pation of another person in unlawful Internet gam9 bling, of—

10 (A) credit, or the proceeds of credit, ex11 tended to or on behalf of such other person (in12 cluding credit extended through the use of a

13 credit card);

14 (B) an electronic fund transfer or funds

15 transmitted by or through a money transmit16 ting business, or the proceeds of an electronic

17 fund transfer or money transmitting service,

18 from or on behalf of the other person;

19 (C) any check, draft, or similar instrument

20 which is drawn by or on behalf of the other per21 son and is drawn on or payable at or through

22 any financial institution; or

23 (D) the proceeds of any other form of fi24 nancial transaction as the Federal functional

25 regulators may prescribe by regulation which

26 involves a financial institution as a payor or fi-
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1 nancial intermediary on behalf of or for the

2 benefit of the other person.

3 (2) BETS OR WAGERS.—The term ‘‘bets or

4 wagers’’—

5 (A) means the staking or risking by any

6 person of something of value upon the outcome

7 of a contest of others, a sporting event, or a

8 game subject to chance, upon an agreement or

9 understanding that the person or another per10 son will receive something of greater value than

11 the amount staked or risked in the event of a

12 certain outcome;

13 (B) includes the purchase of a chance or

14 opportunity to win a lottery or other prize

15 (which opportunity to win is predominantly sub16 ject to chance);

17 (C) includes any scheme of a type de18 scribed in section 3702 of title 28, United

19 States Code;

20 (D) includes any instructions or informa21 tion pertaining to the establishment or move22 ment of funds in an account by the bettor or

23 customer with the business of betting or wager24 ing; and

25 (E) does not include—
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1 (i) any activity governed by the secu2 rities laws (as that term is defined in sec3 tion 3(a)(47) of the Securities Exchange

4 Act of 1934) for the purchase or sale of se5 curities (as that term is defined in section

6 3(a)(10) of such Act);

7 (ii) any transaction conducted on or

8 subject to the rules of a registered entity

9 or exempt board of trade pursuant to the

10 Commodity Exchange Act;

11 (iii) any over-the-counter derivative

12 instrument;

13 (iv) any other transaction that—

14 (I) is excluded or exempt from

15 regulation under the Commodity Ex16 change Act; or

17 (II) is exempt from State gaming

18 or bucket shop laws under section

19 12(e) of the Commodity Exchange Act

20 or section 28(a) of the Securities Ex21 change Act of 1934;

22 (v) any contract of indemnity or guar23 antee;

24 (vi) any contract for insurance;
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1 (vii) any deposit or other transaction

2 with a depository institution (as defined in

3 section 3(c) of the Federal Deposit Insur4 ance Act);

5 (viii) any participation in a simulation

6 sports game or an educational game or

7 contest that—

8 (I) is not dependent solely on the

9 outcome of any single sporting event

10 or nonparticipant’s singular individual

11 performance in any single sporting

12 event;

13 (II) has an outcome that reflects

14 the relative knowledge and skill of the

15 participants with such outcome deter16 mined predominantly by accumulated

17 statistical results of sporting events;

18 and

19 (III) offers a prize or award to a

20 participant that is established in ad21 vance of the game or contest and is

22 not determined by the number of par23 ticipants or the amount of any fees

24 paid by those participants; and
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1 (ix) any lawful transaction with a

2 business licensed or authorized by a State.

3 (3) DESIGNATED PAYMENT SYSTEM DE4 FINED.—The term ‘‘designated payment system’’

5 means any system utilized by any creditor, credit

6 card issuer, financial institution, operator of a ter7 minal at which an electronic fund transfer may be

8 initiated, money transmitting business, or inter9 national, national, regional, or local network utilized

10 to effect a credit transaction, electronic fund trans11 fer, or money transmitting service, or any partici12 pant in such network, that the Federal functional

13 regulators determine, by regulation or order, could

14 be utilized in connection with, or to facilitate, any

15 restricted transaction.

16 (4) FEDERAL FUNCTIONAL REGULATOR.—The

17 term ‘‘Federal functional regulator’’ has the same

18 meaning as in section 509(2) of the Gramm-Leach19 Bliley Act.

20 (5) INTERNET.—The term ‘‘Internet’’ means

21 the international computer network of interoperable

22 packet switched data networks.

23 (6) UNLAWFUL INTERNET GAMBLING.—The

24 term ‘‘unlawful Internet gambling’’ means to place,

25 receive, or otherwise transmit a bet or wager by any
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1 means which involves the use, at least in part, of the

2 Internet where such bet or wager is unlawful under

3 any applicable Federal or State law in the State in

4 which the bet or wager is initiated, received, or oth5 erwise made.

6 (7) OTHER TERMS.—

7 (A) CREDIT; CREDITOR; AND CREDIT

8 CARD.—The terms ‘‘credit’’, ‘‘creditor’’, and

9 ‘‘credit card’’ have the meanings given such

10 terms in section 103 of the Truth in Lending

11 Act.

12 (B) ELECTRONIC FUND TRANSFER.—The

13 term ‘‘electronic fund transfer’’—

14 (i) has the meaning given such term

15 in section 903 of the Electronic Fund

16 Transfer Act; and

17 (ii) includes any fund transfer covered

18 by Article 4A of the Uniform Commercial

19 Code, as in effect in any State.

20 (C) FINANCIAL INSTITUTION.—The term

21 ‘‘financial institution’’—

22 (i) has the meaning given such term

23 in section 903 of the Electronic Fund

24 Transfer Act; and
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1 (ii) includes any financial institution,

2 as defined in section 509(3) of the

3 Gramm-Leach-Bliley Act.

4 (D) MONEY TRANSMITTING BUSINESS AND

5 MONEY TRANSMITTING SERVICE.—The terms

6 ‘‘money transmitting business’’ and ‘‘money

7 transmitting service’’ have the meanings given

8 such terms in section 5330(d) of title 31,

9 United States Code.

10 SEC. 5. COMMON SENSE RULE OF CONSTRUCTION.

11 No provision of this Act shall be construed as alter12 ing, limiting, extending, changing the status of, or other13 wise affecting any law relating to, affecting, or regulating

14 gambling within the United States.

Passed the House of Representatives June 10, 2003.

Attest:

Clerk.