[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 627 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 627

 To prevent the use of certain payment instruments, credit cards, and 
 fund transfers for unlawful Internet gambling, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 13, 2003

 Mr. Kyl (for himself, Mr. Shelby, and Mrs. Feinstein) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To prevent the use of certain payment instruments, credit cards, and 
 fund transfers 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.

    Congress finds that--
            (1) Internet gambling is primarily funded through personal 
        use of payment system instruments, 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 growing 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;
            (5) gambling through the Internet, which has grown rapidly 
        in the half-decade preceding the enactment of this Act, opens 
        up the possibility of immediate, individual, 24-hour access in 
        every home to the full range of wagering opportunities on 
        sporting events or casino-like contests, such as roulette, slot 
        machines, poker, or black-jack; and
            (6) the extent to which gambling is permitted and regulated 
        in the United States has been primarily a matter for 
        determination by individual States and, if applicable, Indian 
        tribes, with Federal law serving to prevent interstate or other 
        attempts to evade or avoid such determinations.

SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT SYSTEM INSTRUMENT, 
              CREDIT CARD, OR FUND TRANSFER FOR UNLAWFUL INTERNET 
              GAMBLING.

    Chapter 53 of title 31, United States Code, is amended by adding at 
the end the following:

         ``SUBCHAPTER IV--FUNDING OF ILLEGAL INTERNET GAMBLING

``Sec. 5361. Definitions
    ``For purposes of this subchapter, the following definitions shall 
apply:
            ``(1) Bet or wager.--The term `bet or wager'--
                    ``(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 value 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, to, or from an account by the bettor or customer 
                with regard to 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 an insured institution;
                            ``(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; or
                            ``(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 section 5366, any creditor, credit card issuer, 
        insured institution, or other 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.--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, stored value product 
        transaction, 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 of the United States, 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) Office.--The term `Office' means the Office of 
        Electronic Funding Oversight, established under section 5362.
            ``(7) Restricted transaction.--The term `restricted 
        transaction' means any transaction or transmittal involving any 
        credit, funds, instrument, or proceeds described in any 
        paragraph of section 5363 which the recipient is prohibited 
        from accepting under section 5363.
            ``(8) Secretary.--The term `Secretary' means the Secretary 
        of the Treasury.
            ``(9) Unlawful internet gambling.--The term `unlawful 
        Internet gambling' means the placing, receipt, or other 
        transmission of 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.
            ``(10) Other terms.--
                    ``(A) Credit; creditor; credit card; and card 
                issuer.--The terms `credit', `creditor', `credit card', 
                and `card issuer' have the same meanings as in section 
                103 of the Truth in Lending Act.
                    ``(B) Electronic fund transfer.--The term 
                `electronic fund transfer'--
                            ``(i) has the same meaning as in section 
                        903 of the Electronic Fund Transfer Act, except 
                        that such term includes transfers that would 
                        otherwise be excluded under section 903(6)(E) 
                        of that 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 same meaning as in section 903 of 
                the Electronic Fund Transfer Act, except that such term 
                does not include a casino, sports book, or other 
                business at or through which bets or wagers may be 
                placed or received.
                    ``(D) Insured institution.--The term `insured 
                institution' means--
                            ``(i) an insured depository institution, as 
                        defined in section 3 of the Federal Deposit 
                        Insurance Act; and
                            ``(ii) an insured credit union, as defined 
                        in section 101 of the Federal Credit Union Act.
                    ``(E) Money transmitting business and money 
                transmitting service.--The terms `money transmitting 
                business' and `money transmitting service' have the 
                same meanings as in section 5330(d) (determined without 
                regard to any regulations issued by the Secretary 
                thereunder).
``Sec. 5362. Office of electronic funding oversight; policies and 
              procedures to identify and prevent restricted 
              transactions
    ``(a) Establishment of Treasury Office.--
            ``(1) In general.--There is established within the 
        Department of the Treasury, the Office of Electronic Funding 
        Oversight, the purposes of which are--
                    ``(A) to coordinate Federal efforts to prohibit 
                restricted transactions; and
                    ``(B) otherwise to carry out the duties of the 
                Office, as specified in this subchapter.
            ``(2) Director.--The Office shall be headed by a Director, 
        appointed by the Secretary. The director of the Office may 
        serve as the designee of the Secretary, at the request of the 
        Secretary, for any purpose under this subchapter.
    ``(b) Regulations.--Not later than 6 months after the date of 
enactment of this subchapter, the Office, in consultation with the 
Board of Governors of the Federal Reserve System and the Attorney 
General of the United States, shall prescribe regulations requiring any 
designated payment system, and all participants therein, to establish 
policies and procedures reasonably designed to identify and prevent 
restricted transactions through the establishment of policies and 
procedures that--
            ``(1) 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;
            ``(2) block restricted transactions identified as a result 
        of the policies and procedures developed pursuant to paragraph 
        (1); and
            ``(3) prevent the acceptance of the products or services of 
        the payment system in connection with a restricted transaction.
    ``(c) Requirements for Policies and Procedures.--In prescribing 
regulations pursuant to subsection (b), the Office 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 imposed under such regulations, if the Office finds 
        that it is not reasonably practical to identify and block, or 
        otherwise prevent, such transactions.
    ``(d) 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, stored value product transaction, or money transmitting 
service, or a participant in such network, shall be considered to be in 
compliance with the regulations prescribed under subsection (b), 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--
                    ``(A) to identify and block restricted 
                transactions; or
                    ``(B) to 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 (b).
    ``(e) No Liability for Blocking or Refusing To Honor Restricted 
Transactions.--A person that is subject to a regulation prescribed or 
order issued under this subchapter 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 regulations prescribed under this section, 
shall not be liable to any party for such action.
    ``(f) Regulatory Enforcement.--Regulations issued by the Office 
under this subchapter shall be enforced by the Federal functional 
regulators and the Federal Trade Commission, in the manner provided in 
section 505(a) of the Gramm-Leach-Bliley Act.
``Sec. 5363. Prohibition on acceptance of any bank instrument for 
              unlawful Internet gambling
    ``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 such other person;
            ``(3) any check, draft, or similar instrument which is 
        drawn by or on behalf of such 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 such other 
        person.
``Sec. 5364. Civil remedies
    ``(a) Jurisdiction.--The district courts of the United States shall 
have original and exclusive jurisdiction to prevent and restrain 
violations of this subchapter or the rules or regulations issued under 
this subchapter by issuing appropriate orders in accordance with this 
section, regardless of whether a prosecution has been initiated under 
this subchapter.
    ``(b) Proceedings.--
            ``(1) Institution by federal government.--
                    ``(A) In general.--The United States, acting 
                through the Attorney General, or, in the case of rules 
                or regulations issued under this subchapter, through an 
                agency authorized to enforce such regulations in 
                accordance with this subchapter, may institute 
                proceedings under this section to prevent or restrain a 
                violation or a threatened violation of this subchapter 
                or such rules or regulations.
                    ``(B) Relief.--Upon application of the United 
                States under this paragraph, the district court may 
                enter a preliminary injunction or an injunction against 
                any person to prevent or restrain a violation or 
                threatened violation of this subchapter or the rules or 
                regulations issued under this subchapter, in accordance 
                with rule 65 of the Federal Rules of Civil Procedure.
            ``(2) Institution by state attorney general.--
                    ``(A) In general.--The attorney general of a State 
                (or other appropriate State official) in which a 
                violation of this subchapter allegedly has occurred or 
                will occur may institute proceedings under this section 
                to prevent or restrain the violation or threatened 
                violation.
                    ``(B) Relief.--Upon application of the attorney 
                general (or other appropriate State official) of an 
                affected State under this paragraph, the district court 
                may enter a preliminary injunction or an injunction 
                against any person to prevent or restrain a violation 
                or threatened violation of this subchapter, in 
                accordance with rule 65 of the Federal Rules of Civil 
                Procedure.
            ``(3) Indian lands.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), for a violation of this subchapter or the 
                rules or regulations issued under this subchapter 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 paragraph 
                        (1); 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.
                    ``(B) Rule of construction.--No provision of this 
                subchapter shall be construed as altering, superseding, 
                or otherwise affecting the application of the Indian 
                Gaming Regulatory Act.
    ``(c) Expedited Proceedings.--In addition to any proceeding under 
subsection (b), a district court may, in exigent circumstances, enter a 
temporary restraining order against a person alleged to be in violation 
of this subchapter or the rules or regulations issued under this 
subchapter, upon application of the United States under subsection 
(b)(1), or the attorney general (or other appropriate State official) 
of an affected State under subsection (b)(2), in accordance with rule 
65(b) of the Federal Rules of Civil Procedure.
    ``(d) Limitation Relating to Interactive Computer Services.--
            ``(1) In general.--Relief granted under this section 
        against an interactive computer service shall--
                    ``(A) be limited to the removal of, or disabling of 
                access to, an online site violating this subchapter, or 
                a hypertext link to an online site violating this 
                subchapter, that resides on a computer server that such 
                service controls or operates, except that the 
                limitation in this subparagraph shall not apply if the 
                service is subject to liability under this section 
                pursuant to section 5366;
                    ``(B) be available only after notice to the 
                interactive computer service and an opportunity for the 
                service to appear are provided;
                    ``(C) not impose any obligation on an interactive 
                computer service to monitor its service or to 
                affirmatively seek facts indicating activity violating 
                this subchapter;
                    ``(D) specify the interactive computer service to 
                which it applies; and
                    ``(E) specifically identify the location of the 
                online site or hypertext link to be removed or access 
                to which is to be disabled.
            ``(2) Coordination with other law.--An interactive computer 
        service that does not violate this subchapter shall not be 
        liable under section 1084 of title 18, United States Code, 
        except that the limitation in this paragraph shall not apply if 
        an interactive computer service has actual knowledge and 
        control of bets and wagers and--
                    ``(A) 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
                    ``(B) 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.
            ``(3) Rule of construction.--The provisions of paragraph 
        (2) do not affect any potential liability of an interactive 
        computer service or other person under any provision of title 
        18, United States Code, other than as specifically provided in 
        paragraph (2).
    ``(e) Factors To Be Considered in Certain Cases.--In considering 
granting relief under this section 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, stored value product 
transaction, or money transmitting service, or a participant in such 
network, the court shall consider--
            ``(1) the extent to which the person extending credit or 
        transmitting funds knew or should have known that the 
        transaction was in connection with unlawful Internet gambling;
            ``(2) the history of such person in extending credit or 
        transmitting funds when such person knew or should have known 
        that the transaction is in connection with unlawful Internet 
        gambling;
            ``(3) the extent to which such person has established and 
        is maintaining policies and procedures in compliance with rules 
        and regulations issued under this subchapter;
            ``(4) the extent to which it is feasible for any specific 
        remedy prescribed as part of such relief to be implemented by 
such person without substantial deviation from normal business 
practice; and
            ``(5) the costs and burdens that the specific remedy will 
        have on such person.
    ``(f) Notice to Regulators and Financial Institutions.--Before 
initiating any proceeding under subsection (b) with respect to a 
violation or potential violation of this subchapter or the rules or 
regulations issued under this subchapter 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, stored value 
product transaction, or money transmitting service, or any participant 
in such network, the Attorney General of the United States, an attorney 
general of a State (or other appropriate State official), or an agency 
authorized to initiate such proceeding under this subchapter, shall--
            ``(1) notify such person, and the appropriate regulatory 
        agency (as determined in accordance with section 5362(f) for 
        such person) of such violation or potential violation and the 
        remedy to be sought in such proceeding; and
            ``(2) allow such person 30 days to implement a reasonable 
        remedy for the violation or potential violation, consistent 
        with the factors described in subsection (e), and in 
        conjunction with such action as the appropriate regulatory 
        agency may take.
``Sec. 5365. Criminal penalties
    ``(a) In General.--Whoever violates this subchapter or the rules or 
regulations issued under this subchapter shall be fined under title 18, 
United States Code, or imprisoned for not more than 5 years, or both.
    ``(b) Permanent Injunction.--Upon conviction of a person under this 
section, 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.
``Sec. 5366. Circumventions prohibited
    ``Notwithstanding section 5361(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, stored value product 
transaction, or money transmitting service, or any participant in such 
network, or any interactive computer service or telecommunications 
service, may be liable under this subchapter 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.''.

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 the amendments 
        made by 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 purposes.
    (b) Report Required.--The Secretary of the Treasury shall submit an 
annual report to Congress on any deliberations between the United 
States and other countries on issues relating to Internet gambling.

SEC. 5. AMENDMENTS TO CRIMINAL 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''.
                                 <all>