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Following on from news that the Bush administration was seeking to push through controversial clarifications to the UIGEA, the Treasury and Federal Reserve have released a 66 page document detailing the rules. The new regulations – due to come into force just one day before president-elect, Barack Obama, is sworn into office – require banks to apply “due diligence” procedures to identify and block payments to companies that provide illegal online gambling. All this, despite calls from banks, politicians, pressure groups and the general public to suspend or delay any new clarifications.

The new rules place the onus on banks and payment processors to discover for themselves if their clients are offering online gambling and whether or not that gambling is illegal. The financial institutions are prevented from taking a blanket approach to online gambling, as certain varieties are exempt from the definition. Horse racing and fantasy sports are among a few pastimes excluded from prohibition for the dubious reason that: chance does not play a “significant” factor in the outcome of the bets and wagers placed on them. Poker, it was concluded, does not fall under the same bracket as these forms of gambling due to a more “significant” proportion of the outcome being dependent on luck.

Many representatives for the financial sector have called for the postponement of the document on the grounds that, as things stand, it will place an overlarge burden on the already struggling U.S. economy. The ruling requires that “U.S. financial firms that participate in designated payment systems to establish and implement policies that are reasonably designed to prevent payments to businesses in connection with unlawful Internet gambling.” What these policies are is not made clear, but the bill estimates that it will cost the economy over $100 million, as well as requiring 1 million man-hours.

The new regulations that have been forced upon the banks all hang upon being able to identify what it is that constitutes “illegal Internet gambling.” Many of the criticisms aimed at the original UIGEA argued that the label was totally undefined and unworkably vague. Any hopes that the Treasury and the Federal Reserve might have brought some clarity to the issue faded away on reading the report:

“The Act generally defines “unlawful Internet gambling” as placing, receiving, or otherwise knowingly transmitting 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.”

The agencies pointed out that they did not have the resources of the legislative impetus to craft out a formal definition, and so “does not spell out which activities are legal and which are illegal, but rather relies on the underlying substantive Federal and State laws.”

The banks have been given until December 2009 to comply with the new regulations. Many are hoping that this delay will give Barack Obama’s new administration time to renounce the bill and overturn the UIGEA before it can have too negative an impact on the poker industry.

Although the outlook may seem negative for online poker in the US, and around the world, gaming law expert Professor I Nelson Rose has claimed that the new rules will have little to no effect. He has pointed out that not only are most gambling operators based off-shore, they also use foreign banks, rather than those based in the U.S. The UIGEA can only possibly apply to American financial institutions, and the U.S. banks are not obliged to ask their foreign cousins who they are taking their money to and from.

He also notes that it remains entirely legal for an individual to play online poker. It would be illegal for the poker site to accept your money for the purposes of betting and wagering, but the legal onus is on them and the banks rather than the individual player. The rules also make no mention of withdrawing money from gambling companies, so those looking to cash their money out should not face any issues. Whether these new regulations come into effect, and whether or not that will make any noticeable impact will not be known until 2009.