[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 556 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 556

 To prevent the use of certain bank instruments for unlawful Internet 
                   gambling, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 12, 2001

  Mr. Leach introduced the following bill; which was referred to the 
 Committee on Financial Services, and in addition to the Committee on 
   the Judiciary, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unlawful Internet Gambling Funding 
Prohibition 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 Commission in 1999 
        recommended the passage of legislation 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 institutions and the consumer 
        credit industry.
            (4) Internet gambling conducted through offshore 
        jurisdictions has been identified by United States law 
        enforcement officials as a significant money laundering 
        vulnerability.

SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY BANK INSTRUMENT FOR UNLAWFUL 
              INTERNET GAMBLING.

    (a) In General.--No person engaged in a gambling business may 
knowingly accept, in connection with the participation of another 
person in unlawful Internet gambling--
            (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 transmitted 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 financial institution; or
            (4) the proceeds of any other form of financial transaction 
        as the Secretary may prescribe by regulation 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 following 
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 predominantly 
                subject to chance, upon an agreement or understanding 
                that the person or another person 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 subject to chance);
                    (C) includes any scheme of a type described in 
                section 3702 of title 28; and
                    (D) does not include--
                            (i) any bona fide business transaction 
                        governed by the securities laws (as that term 
                        is defined in section 3(a)(47) of the 
                        Securities Exchange Act of 1934) for the 
                        purchase or sale at a future date of securities 
                        (as that term is defined in section 3(a)(10) of 
                        such Act);
                            (ii) any transaction on or subject to the 
                        rules of a contract market designated pursuant 
                        to section 5 of the Commodity Exchange Act;
                            (iii) any over-the-counter derivative 
                        instrument;
                            (iv) any contract of indemnity or 
                        guarantee;
                            (v) any contract for life, health, or 
                        accident insurance; or
                            (vi) 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 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 
                                determined predominantly by accumulated 
                                statistical results of sporting events; 
                                and
                                    (III) offers a prize or award to a 
                                participant that is established in 
                                advance of the game or contest and is 
                                not determined by the number of 
                                participants or the amount of any fees 
                                paid by those participants.
            (2) Gambling business.--The term ``gambling business'' 
        means--
                    (A) a business that is conducted at a gambling 
                establishment;
                    (B) a business that--
                            (i) involves--
                                    (I) the placing, receiving, or 
                                otherwise making of bets or wagers; or
                                    (II) the offering to engage in the 
                                placing, receiving, or otherwise making 
                                of bets or wagers;
                            (ii) involves 1 or more persons who 
                        conduct, finance, manage, supervise, direct, or 
                        own all or part of such business; and
                            (iii) has been or remains in substantially 
                        continuous operation for a period in excess of 
                        10 days or has a gross revenue of $2,000 or 
                        more from such business during any 24-hour 
                        period; and
                    (C) any agent who knowingly solicits for a business 
                described in subparagraph (A) or (B).
            (3) Internet.--The term ``Internet'' means the 
        international computer network of interoperable packet switched 
        data networks.
            (4) Unlawful internet gambling.--The term ``unlawful 
        Internet gambling'' means to place, receive, or otherwise make 
        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 otherwise made.
            (5) 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''--
                            (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 4 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 jurisdiction to prevent and 
        restrain violations of this section by issuing appropriate 
        orders in accordance with this section, regardless of whether a 
        prosecution has been initiated under this section.
            (2) Proceedings.--
                    (A) Institution by federal government.--
                            (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 general of a 
                        State (or other appropriate State official) in 
                        which a violation of this section allegedly has 
                        occurred or will occur may institute 
                        proceedings under this subsection to prevent or 
                        restrain the violation.
                            (ii) Relief.--Upon application of the 
                        attorney general (or other appropriate State 
                        official) of an affected State 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.
                    (C) Indian lands.--Notwithstanding subparagraphs 
                (A) and (B), for a violation that is alleged to have 
                occurred, or may occur, on Indian lands (as that term 
                is defined 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.
            (3) Expedited proceedings.--
                    (A) In general.--In addition to any proceeding 
                under paragraph (2), a district court may, in exigent 
                circumstances, enter a temporary restraining order 
                against a person alleged to be in violation of this 
                section upon application of the United States under 
                paragraph (2)(A), or the attorney general (or other 
                appropriate State official) of an affected State under 
                paragraph (2)(B), in accordance with Rule 65(b) of the 
                Federal Rules of Civil Procedure.
    (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 conviction of a person 
        under this subsection, the court may enter a permanent 
injunction enjoining such person from placing, receiving, or otherwise 
making bets or wagers or sending, receiving, or inviting information 
assisting in the placing of bets or wagers.
    (e) Safe Harbor for Financial Intermediaries.--
            (1) In general.--No creditor, credit card issuer, financial 
        institution, operator of a terminal at which an electronic fund 
        transfer may be initiated, money transmitting business, or 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service shall be liable under this section for the 
        involvement of such person, or the use of the facilities of 
        such person--
                    (A) in any credit transaction, electronic fund 
                transfer, or money transmitting service described in 
                subsection (a); or
                    (B) in drawing, paying, transferring, or collecting 
                any check, draft, or other instrument described in 
                subsection (a) or in any regulation prescribed under 
                such subsection.
            (2) Exception for knowing participation in a gambling 
        business.--Paragraph (1) shall not apply with respect to any 
        person referred to in such paragraph which is a gambling 
        business or which knowingly participates in any activity 
        referred to in subparagraph (A) or (B) of such paragraph as an 
        agent or representative of a gambling business.

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--
            (1) encourage cooperation by foreign governments 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 cooperation 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. ENFORCEMENT ACTIONS.

    Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is 
amended by adding at the end the following new subsection:
    ``(x) Depository Institution Involvement in Internet Gambling.--
Notwithstanding section 3(e) of the Unlawful Internet Gambling Funding 
Prohibition Act, if any appropriate Federal banking agency determines 
that any insured depository institution is engaged in any of the 
following activities, the agency may issue an order to such institution 
prohibiting such institution from continuing to engage in any of the 
following activities:
            ``(1) Extending credit, or facilitating an extension of 
        credit, electronic fund transfer, or money transmitting service 
        with the actual knowledge that any person is violating section 
        3(a) of the Unlawful Internet Gambling Funding Prohibition Act 
        in connection with such extension of credit, electronic fund 
        transfer, or money transmitting service.
            ``(2) Paying, transferring, or collecting on any check, 
        draft, or other instrument drawn on any depository institution 
        with the actual knowledge that any person is violating section 
        3(a) of the Unlawful Internet Gambling Funding Prohibition Act 
        in connection with such check, draft, or other instrument.''.
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