IIB
107TH CONGRESS
2D SESSION
H. R. 556
IN THE SENATE OF THE UNITED STATES
OCTOBER 2, 2002
Received; read twice and referred to the Committee on the Judiciary
AN ACT
To prevent the use of certain bank instruments for unlawful
Internet gambling, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Leach-LaFalce Inter-
net Gambling Enforcement 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 Com-
mission in 1999 recommended the passage of legisla-
tion 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 institu-
tions and the consumer credit industry.
(4) Internet gambling conducted through off-
shore jurisdictions has been identified by United
States law enforcement officials as a significant
money laundering vulnerability.
SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY BANK IN-
STRUMENT FOR UNLAWFUL INTERNET GAM-
BLING.
(a) IN GENERAL.—No person engaged in the busi-
ness of betting or wagering may knowingly accept, in con-
nection with the participation of another person in unlaw-
ful Internet gambling—
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(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 trans-
mitted 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 finan-
cial institution; or
(4) the proceeds of any other form of financial
transaction as the Secretary may prescribe by regu-
lation 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 fol-
lowing 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 subject to chance, upon an agreement or
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understanding that the person or another per-
son 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 sub-
ject to chance);
(C) includes any scheme of a type de-
scribed in section 3702 of title 28, United
States Code;
(D) includes any instructions or informa-
tion pertaining to the establishment or move-
ment of funds in an account by the bettor or
customer with the business of betting or wager-
ing; and
(E) does not include—
(i) any activity governed by the secu-
rities laws (as that term is defined in sec-
tion 3(a)(47) of the Securities Exchange
Act of 1934) for the purchase or sale of se-
curities (as that term is defined in section
3(a)(10) of such Act);
(ii) any transaction conducted on or
subject to the rules of a registered entity
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or exempt board of trade pursuant to the
Commodity Exchange Act;
(iii) any over-the-counter derivative
instrument;
(iv) any other transaction that—
(I) is excluded or exempt from
regulation under the Commodity Ex-
change Act; or
(II) is exempt from State gaming
or bucket shop laws under section
12(e) of the Commodity Exchange Act
or section 28(a) of the Securities Ex-
change Act of 1934;
(v) any contract of indemnity or guar-
antee;
(vi) any contract for insurance;
(vii) any deposit or other transaction
with a depository institution (as defined in
section 3(c) of the Federal Deposit Insur-
ance Act);
(viii) 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
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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 deter-
mined predominantly by accumulated
statistical results of sporting events;
and
(III) offers a prize or award to a
participant that is established in ad-
vance of the game or contest and is
not determined by the number of par-
ticipants or the amount of any fees
paid by those participants; and
(ix) any lawful transaction with a
business licensed or authorized by a State.
(2) BUSINESS
OF
BETTING
OR
WAGERING.—
The term ‘‘business of betting or wagering’’ does not
include, other than for purposes of subsection (e),
any creditor, credit card issuer, insured depository
institution, financial institution, operator of a ter-
minal at which an electronic fund transfer may be
initiated, money transmitting business, or inter-
national, national, regional, or local network utilized
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to effect a credit transaction, electronic fund trans-
fer, stored value product transaction, or money
transmitting service, or any participant in such net-
work, or any interactive computer service or tele-
communications service.
(3) 
DESIGNATED
PAYMENT
SYSTEM
DE-
FINED.—The term ‘‘designated payment system’’
means any system utilized by any creditor, credit
card issuer, financial institution, operator of a ter-
minal at which an electronic fund transfer may be
initiated, money transmitting business, or inter-
national, national, regional, or local network utilized
to effect a credit transaction, electronic fund trans-
fer, or money transmitting service, or any partici-
pant in such network, that the Secretary, in con-
sultation with the Board of Governors of the Federal
Reserve System and the Attorney General, deter-
mines, by regulation or order, could be utilized in
connection with, or to facilitate, any restricted trans-
action.
(4) INTERNET.—The term ‘‘Internet’’ means
the international computer network of interoperable
packet switched data networks.
(5) INTERACTIVE
COMPUTER
SERVICE.—The
term ‘‘interactive computer service’’ has the same
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meaning as in section 230(f) of the Communications
Act of 1934.
(6) RESTRICTED TRANSACTION.—The term ‘‘re-
stricted transaction’’ means any transaction or
transmittal involving any credit, funds, instrument,
or proceeds described in any paragraph of subsection
(a) which the recipient is prohibited from accepting
under subsection (a).
(7) UNLAWFUL
INTERNET
GAMBLING.—The
term ‘‘unlawful Internet gambling’’ means to place,
receive, or otherwise transmit 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 oth-
erwise made.
(8) 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’’—
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(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 4A 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 juris-
diction to prevent and restrain violations of this sec-
tion by issuing appropriate orders in accordance
with this section, regardless of whether a prosecu-
tion has been initiated under this section.
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(2) PROCEEDINGS.—
(A) INSTITUTION
BY
FEDERAL
GOVERN-
MENT.—
(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 gen-
eral of a State (or other appropriate State
official) in which a violation of this section
allegedly has occurred or will occur may in-
stitute proceedings under this subsection to
prevent or restrain the violation.
(ii) RELIEF.—Upon application of the
attorney general (or other appropriate
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State official) of an affected State under
this subparagraph, the district court may
enter a preliminary injunction or an in-
junction against any person to prevent or
restrain a violation of this section, in ac-
cordance with Rule 65 of the Federal
Rules of Civil Procedure.
(C) INDIAN LANDS.—
(i) IN
GENERAL.—Notwithstanding
subparagraphs (A) and (B), for a violation
that is alleged to have occurred, or may
occur, on Indian lands (as that term is de-
fined 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.
(ii) RULE
OF
CONSTRUCTION.—No
provision of this section shall be construed
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as altering, superseding, or otherwise af-
fecting the application of the Indian Gam-
ing Regulatory Act.
(3) EXPEDITED PROCEEDINGS.—In addition to
any proceeding under paragraph (2), a district court
may, in exigent circumstances, enter a temporary re-
straining order against a person alleged to be in vio-
lation of this section upon application of the United
States under paragraph (2)(A), or the attorney gen-
eral (or other appropriate State official) of an af-
fected State under paragraph (2)(B), in accordance
with Rule 65(b) of the Federal Rules of Civil Proce-
dure.
(4) LIMITATION
RELATING
TO
INTERACTIVE
COMPUTER SERVICES.—
(A) IN
GENERAL.—Relief granted under
this subsection against an interactive computer
service shall—
(i) be limited to the removal of, or dis-
abling of access to, an online site violating
this section, or a hypertext link to an on-
line site violating this section, that resides
on a computer server that such service
controls or operates; except this limitation
shall not apply if the service is subject to
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liability under this section pursuant to sub-
section (e);
(ii) be available only after notice to
the interactive computer service and an op-
portunity for the service to appear are pro-
vided;
(iii) not impose any obligation on an
interactive computer service to monitor its
service or to affirmatively seek facts indi-
cating activity violating this section;
(iv) specify the interactive computer
service to which it applies; and
(v) specifically identify the location of
the online site or hypertext link to be re-
moved or access to which is to be disabled.
(B) COORDINATION WITH OTHER LAW.—
An interactive computer service that does not
violate this section shall not be liable under sec-
tion 1084 of title 18, except this limitation shall
not apply if an interactive computer service has
actual knowledge and control of bets and wa-
gers and—
(i) operates, manages, supervises, or
directs an Internet website at which unlaw-
ful bets or wagers may be placed, received,
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or otherwise made or at which unlawful
bets or wagers are offered to be placed, re-
ceived, or otherwise made; or
(ii) owns or controls, or is owned or
controlled by, any person who operates,
manages, supervises, or directs an Internet
website at which unlawful bets or wagers
may be placed, received, or otherwise made
or at which unlawful bets or wagers are of-
fered to be placed, received, or otherwise
made.
(5) FACTORS TO BE CONSIDERED IN CERTAIN
CASES.—In considering granting relief under this
subsection against any payment system, or any par-
ticipant in a payment system that is a creditor, cred-
it card issuer, financial institution, operator of a ter-
minal at which an electronic fund transfer may be
initiated, money transmitting business, or inter-
national, national, regional, or local network utilized
to effect a credit transaction, electronic fund trans-
fer, or money transmitting service, or a participant
in such network, the court shall consider the fol-
lowing factors:
(A) The extent to which such person is ex-
tending credit or transmitting funds knowing
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the transaction is in connection with unlawful
Internet gambling.
(B) The history of such person in extend-
ing credit or transmitting funds knowing the
transaction is in connection with unlawful
Internet gambling.
(C) The extent to which such person has
established and is maintaining policies and pro-
cedures in compliance with regulations pre-
scribed under subsection (f).
(D) The feasibility that any specific rem-
edy prescribed in the order issued under this
subsection can be implemented by such person
without substantial deviation from normal busi-
ness practice.
(E) The costs and burdens the specific
remedy will have on such person.
(6) NOTICE TO REGULATORS AND FINANCIAL
INSTITUTIONS.—Before initiating any proceeding
under paragraph (2) with respect to a violation or
potential violation of this section by any creditor,
credit card issuer, financial institution, operator of a
terminal at which an electronic fund transfer may be
initiated, money transmitting business, or inter-
national, national, regional, or local network utilized
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to effect a credit transaction, electronic fund trans-
fer, or money transmitting service, or any partici-
pant in such network, the Attorney General of the
United States or an attorney general of a State (or
other appropriate State official) shall—
(A) notify such person, and the appro-
priate regulatory agency (as determined in ac-
cordance with subsection (f)(5)) for such per-
son, of such violation or potential violation and
the remedy to be sought in such proceeding;
and
(B) allow such person 30 days to imple-
ment a reasonable remedy for the violation or
potential violation, consistent with the factors
described in paragraph (5) and in conjunction
with such action as the appropriate regulatory
agency may take.
(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 convic-
tion of a person under this subsection, the court
may enter a permanent injunction enjoining such
person from placing, receiving, or otherwise making
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illegal bets or wagers or sending, receiving, or invit-
ing information assisting in the placing of bets or
wagers.
(e) 
CIRCUMVENTIONS
PROHIBITED.—Notwith-
standing subsection (b)(2), a creditor, credit card issuer,
financial institution, operator of a terminal at which an
electronic fund transfer may be initiated, money transmit-
ting business, or international, national, regional, or local
network utilized to effect a credit transaction, electronic
fund transfer, or money transmitting service, or any par-
ticipant in such network, or any interactive computer serv-
ice or telecommunications service, may be liable under this
section if such creditor, issuer, institution, operator, busi-
ness, network, or participant has actual knowledge and
control of bets and wagers and—
(1) operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers
may be placed, received, or otherwise made or at
which unlawful bets or wagers are offered to be
placed, received, or otherwise made; or
(2) owns or controls, or is owned or controlled
by, any person who operates, manages, supervises,
or directs an Internet website at which unlawful bets
or wagers may be placed, received, or otherwise
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made or at which unlawful bets or wagers are of-
fered to be placed, received, or otherwise made.
(f) POLICIES AND PROCEDURES TO IDENTIFY AND
PREVENT RESTRICTED TRANSACTIONS IN PAYMENT FOR
UNLAWFUL INTERNET GAMBLING.—
(1) REGULATIONS.—Before the end of the 6-
month period beginning on the date of the enact-
ment of this Act, the Secretary of the Treasury, in
consultation with the Board of Governors of the
Federal Reserve System and the Attorney General,
shall prescribe regulations requiring any designated
payment system to establish policies and procedures
reasonably designed to identify and prevent re-
stricted transactions in any of the following ways:
(A) The establishment of policies and pro-
cedures that—
(i) allow the payment system and any
person involved in the payment system to
identify restricted transactions by means of
codes in authorization messages or by
other means; and
(ii) block restricted transactions iden-
tified as a result of the policies and proce-
dures developed pursuant to clause (i).
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(B) The establishment of policies and pro-
cedures that prevent the acceptance of the
products or services of the payment system in
connection with a restricted transaction.
(2) REQUIREMENTS FOR POLICIES AND PROCE-
DURES.—In prescribing regulations pursuant to
paragraph (1), the Secretary shall—
(A) identify types of policies and proce-
dures, including nonexclusive examples, which
would be deemed to be ‘‘reasonably designed to
identify’’ and ‘‘reasonably designed to block’’ or
to ‘‘prevent the acceptance of the products or
services’’ with respect to each type of trans-
action, such as, should credit card transactions
be so designated, identifying transactions by a
code or codes in the authorization message and
denying authorization of a credit card trans-
action in response to an authorization message;
(B) to the extent practical, permit any par-
ticipant in a payment system to choose among
alternative means of identifying and blocking,
or otherwise preventing the acceptance of the
products or services of the payment system or
participant in connection with, restricted trans-
actions; and
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(C) consider exempting restricted trans-
actions from any requirement under paragraph
(1) if the Secretary finds that it is not reason-
ably practical to identify and block, or otherwise
prevent, such transactions.
(3) COMPLIANCE WITH PAYMENT SYSTEM POLI-
CIES
AND
PROCEDURES.—A creditor, credit card
issuer, financial institution, operator of a terminal at
which an electronic fund transfer may be initiated,
money transmitting business, or international, na-
tional, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, or money
transmitting service, or a participant in such net-
work, meets the requirement of paragraph (1) if—
(A) such person relies on and complies
with the policies and procedures of a designated
payment system of which it is a member or par-
ticipant to—
(i) identify and block restricted trans-
actions; or
(ii) otherwise prevent the acceptance
of the products or services of the payment
system, member, or participant in connec-
tion with restricted transactions; and
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(B) such policies and procedures of the
designated payment system comply with the re-
quirements of regulations prescribed under
paragraph (1).
(4) NO LIABILITY FOR BLOCKING OR REFUSING
TO HONOR RESTRICTED TRANSACTIONS.—A person
that is subject to a regulation prescribed or order
issued under this subsection and blocks, or otherwise
refuses to honor, a restricted transaction, or as a
member of a designated payment system relies on
the policies and procedures of the payment system,
in an effort to comply with this section shall not be
liable to any party for such action.
(5) ENFORCEMENT.—This subsection shall be
enforced by the Federal functional regulators and
the Federal Trade Commission under applicable law
in the manner provided in section 505(a) of the
Gramm-Leach-Bliley Act.
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—
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(1) encourage cooperation by foreign govern-
ments 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 coopera-
tion 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. AMENDMENTS TO GAMBLING PROVISIONS.
(a) AMENDMENT TO DEFINITION.—Section 1081 of
title 18, United States Code, is amended—
(1) by designating the five undesignated para-
graphs that begin with ‘‘The term’’ as paragraphs
(1) through (5), respectively; and
(2) in paragraph (5), as so designated—
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(A) by striking ‘‘wire communication’’ and
inserting ‘‘communication’’;
(B) by inserting ‘‘satellite, microwave,’’
after ‘‘cable,’’; and
(C) by inserting ‘‘(whether fixed or mo-
bile)’’ after ‘‘connection’’.
(b) INCREASE IN PENALTY FOR UNLAWFUL WIRE
TRANSFERS
OF
WAGERING
INFORMATION.—Section
1084(a) of title 18, United States Code, is amended by
striking ‘‘two years’’ and inserting ‘‘5 years’’.
Passed the House of Representatives October 1,
2002.
Attest:
JEFF TRANDAHL,
Clerk.