[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 556 Referred in Senate (RFS)]

  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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Leach-LaFalce Internet 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 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 the business of betting or 
wagering 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 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, United States Code;
                    (D) includes any instructions or information 
                pertaining to the establishment or movement of funds in 
                an account by the bettor or customer with the business 
                of betting or wagering; and
                    (E) does not include--
                            (i) any activity 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 of securities 
                        (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 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 Exchange 
                                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 Exchange Act of 
                                1934;
                            (v) any contract of indemnity or guarantee;
                            (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 Insurance 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 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; 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 terminal at which an electronic fund transfer may be 
        initiated, money transmitting business, or international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, stored value 
        product transaction, or money transmitting service, or any 
        participant in such network, or any interactive computer 
        service or telecommunications service.
            (3) Designated payment system defined.--The term 
        ``designated payment system'' means any system utilized 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 international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or any participant in such network, that 
        the Secretary, in consultation with the Board of Governors of 
        the Federal Reserve System and the Attorney General, 
        determines, by regulation or order, could be utilized in 
        connection with, or to facilitate, any restricted transaction.
            (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 meaning as in section 230(f) of 
        the Communications Act of 1934.
            (6) Restricted transaction.--The term ``restricted 
        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 otherwise 
        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''--
                            (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 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.--
                            (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 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.
                            (ii) Rule of construction.--No provision of 
                        this section shall be construed as altering, 
                        superseding, or otherwise affecting the 
                        application of the Indian Gaming Regulatory 
                        Act.
            (3) Expedited proceedings.--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.
            (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 
                        disabling of access to, an online site 
                        violating this section, or a hypertext link to 
                        an online 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 
                        liability under this section pursuant to 
                        subsection (e);
                            (ii) be available only after notice to the 
                        interactive computer service and an opportunity 
                        for the service to appear are provided;
                            (iii) not impose any obligation on an 
                        interactive computer service to monitor its 
                        service or to affirmatively seek facts 
                        indicating 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 removed 
                        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 section 1084 of title 18, 
                except this limitation shall not apply if an 
                interactive computer service has actual knowledge and 
                control of bets and wagers and--
                            (i) 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
                            (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 offered 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 participant in a payment system that is 
        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, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or a participant in such network, the 
        court shall consider the following factors:
                    (A) The extent to which such person is extending 
                credit or transmitting funds knowing the transaction is 
                in connection with unlawful Internet gambling.
                    (B) The history of such person in extending 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 procedures in 
                compliance with regulations prescribed under subsection 
                (f).
                    (D) The feasibility that any specific remedy 
                prescribed in the order issued under this subsection 
                can be implemented by such person without substantial 
                deviation from normal business 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 international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or any participant 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 appropriate 
                regulatory agency (as determined in accordance with 
                subsection (f)(5)) for such person, of such violation 
                or potential violation and the remedy to be sought in 
                such proceeding; and
                    (B) allow such person 30 days to implement 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 conviction of a person 
        under this subsection, the court may enter a permanent 
        injunction enjoining such person from placing, receiving, or 
        otherwise making illegal bets or wagers or sending, receiving, 
        or inviting information assisting in the placing of bets or 
        wagers.
    (e) Circumventions Prohibited.--Notwithstanding subsection (b)(2), 
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, national, regional, or local 
network utilized to effect a credit transaction, electronic fund 
transfer, or money transmitting service, or any participant in such 
network, or any interactive computer service or telecommunications 
service, may be liable under this section if such creditor, issuer, 
institution, operator, business, 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 made or at which unlawful bets 
        or wagers are offered 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 enactment 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 restricted transactions in any 
        of the following ways:
                    (A) The establishment of policies and procedures 
                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 
                        identified as a result of the policies and 
                        procedures developed pursuant to clause (i).
                    (B) The establishment of policies and procedures 
                that prevent the acceptance of the products or services 
                of the payment system in connection with a restricted 
                transaction.
            (2) Requirements for policies and procedures.--In 
        prescribing regulations pursuant to paragraph (1), the 
        Secretary shall--
                    (A) identify types of policies and procedures, 
                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 transaction, 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 
                transaction in response to an authorization message;
                    (B) to the extent practical, permit any participant 
                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 transactions; and
                    (C) consider exempting restricted transactions from 
                any requirement under paragraph (1) if the Secretary 
                finds that it is not reasonably practical to identify 
                and block, or otherwise prevent, such transactions.
            (3) Compliance with payment system policies 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, national, regional, or local network utilized to 
        effect a credit transaction, electronic fund transfer, or money 
        transmitting service, or a participant in such network, 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 participant to--
                            (i) identify and block restricted 
                        transactions; or
                            (ii) otherwise prevent the acceptance of 
                        the products or services of the payment system, 
                        member, or participant in connection with 
                        restricted transactions; and
                    (B) such policies and procedures of the designated 
                payment system comply with the requirements 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--
            (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. AMENDMENTS TO GAMBLING PROVISIONS.

    (a) Amendment to Definition.--Section 1081 of title 18, United 
States Code, is amended--
            (1) by designating the five undesignated paragraphs that 
        begin with ``The term'' as paragraphs (1) through (5), 
        respectively; and
            (2) in paragraph (5), as so designated--
                    (A) by striking ``wire communication'' and 
                inserting ``communication'';
                    (B) by inserting ``satellite, microwave,'' after 
                ``cable,''; and
                    (C) by inserting ``(whether fixed or mobile)'' 
                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.