[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2143 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 2143

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 19, 2003

     Mr. Bachus (for himself, Mr. Oxley, and Ms. Hooley of Oregon) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 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. POLICIES AND PROCEDURES REQUIRED TO PREVENT PAYMENTS FOR 
              UNLAWFUL INTERNET GAMBLING.

    (a) Regulations.--Before the end of the 6-month period beginning on 
the date of the enactment of this Act, the Federal functional 
regulators 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:
            (1) The establishment of policies and procedures that--
                    (A) 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
                    (B) block restricted transactions identified as a 
                result of the policies and procedures developed 
                pursuant to clause (i).
            (2) 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.
    (b) Requirements for Policies and Procedures.--In prescribing 
regulations pursuant to subsection (a), the Federal functional 
regulators shall--
            (1) 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;
            (2) 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
            (3) consider exempting restricted transactions from any 
        requirement subsection (a) if the Federal functional regulators 
        find that it is not reasonably practical to identify and block, 
        or otherwise prevent, such transactions.
    (c) 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 subsection (a) if--
            (1) 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--
                    (A) identify and block restricted transactions; or
                    (B) otherwise prevent the acceptance of the 
                products or services of the payment system, member, or 
                participant in connection with restricted transactions; 
                and
            (2) such policies and procedures of the designated payment 
        system comply with the requirements of regulations prescribed 
        under subsection (a).
    (d) Enforcement.--
            (1) In general.--This section 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.
            (2) Factors to be considered.--In considering any 
        enforcement action 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 
        Federal functional regulators and the Federal Trade Commission 
        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 this 
                subsection.
                    (D) The feasibility that any specific remedy 
                prescribed 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.

SEC. 4. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Restricted transaction.--The term ``restricted 
        transaction'' means any transaction or transmittal to any 
        person engaged in the business of betting or wagering, in 
        connection with the participation of another person in unlawful 
        Internet gambling, of--
                    (A) 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);
                    (B) 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;
                    (C) 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
                    (D) the proceeds of any other form of financial 
                transaction as the Federal functional regulators 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.
            (2) 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.
            (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 Federal functional regulators determine, by regulation or 
        order, could be utilized in connection with, or to facilitate, 
        any restricted transaction.
            (4) Federal functional regulator.--The term ``Federal 
        functional regulator'' has the same meaning as in section 
        509(2) of the Gramm-Leach-Bliley Act.
            (5) Internet.--The term ``Internet'' means the 
        international computer network of interoperable packet switched 
        data networks.
            (6) 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.
            (7) 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''--
                            (i) has the meaning given such term in 
                        section 903 of the Electronic Fund Transfer 
                        Act; and
                            (ii) includes any financial institution, as 
                        defined in section 509(3) of the Gramm-Leach-
                        Bliley 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.
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