[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4411 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4411

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 18, 2005

Mr. Leach (for himself, Mr. Pence, Mr. Bachus, Mr. Osborne, Mr. Pitts, 
 Mr. Boehlert, Mr. Gillmor, Mr. Gilchrest, Mr. Rogers of Michigan, Mr. 
Bass, Mr. Fortenberry, Mr. Ehlers, Mr. Kirk, Mr. Ramstad, Mr. Dent, Mr. 
 Walsh, Mr. McCaul of Texas, Mr. Latham, and Mr. Akin) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 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 
Enforcement Act of 2005''.

SEC. 2. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT INSTRUMENT FOR 
              UNLAWFUL INTERNET GAMBLING.

    (a) In General.--Chapter 53 of title 31, United States Code, is 
amended by adding at the end the following new subchapter:

 ``SUBCHAPTER IV--PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING

``Sec. 5361. Congressional findings and purpose
    ``(a) Findings.--The Congress finds the following:
            ``(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 such sites.
            ``(3) Internet gambling is a growing cause of debt 
        collection problems for insured depository institutions and the 
        consumer credit industry.
            ``(4) New mechanisms for enforcing gambling laws on the 
        Internet are necessary because traditional law enforcement 
        mechanisms are often inadequate for enforcing gambling 
        prohibitions or regulations on the Internet, especially where 
        such gambling crosses State or national borders.
    ``(b) Rule of Construction.--No provision of this subchapter shall 
be construed as altering, limiting, or extending any Federal or State 
law or Tribal-State compact prohibiting, permitting, or regulating 
gambling within the United States.
``Sec. 5362. Definitions
    ``In 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;
                    ``(D) includes any instructions or information 
                pertaining to the establishment or movement of funds by 
                the bettor or customer in, to, or from an account 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 
                        that Act);
                            ``(ii) any transaction conducted on or 
                        subject to the rules of a registered entity or 
                        exempt board of trade under 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 depository institution; or
                            ``(viii) any participation in a simulation 
                        sports game, an educational game, or a 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 of the 
                                participants, or their skill at 
                                physical reaction or physical 
                                manipulation (but not chance), and, in 
                                the case of a simulation sports game, 
                                has an outcome that is 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) Business of betting or wagering.--The term `business 
        of betting or wagering' does not include a financial 
        transaction provider, or any interactive computer service or 
        telecommunications service.
            ``(3) Designated payment system.--The term `designated 
        payment system' means any system utilized by a financial 
        transaction provider 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) Financial transaction provider.--The term `financial 
        transaction provider' means 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, or 
        other participant in a designated payment system.
            ``(5) Internet.--The term `Internet' means the 
        international computer network of interoperable packet switched 
        data networks.
            ``(6) Interactive computer service.--The term `interactive 
        computer service' has the same meaning as in section 230(f) of 
        the Communications Act of 1934.
            ``(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.--
                    ``(A) In general.--The term `unlawful Internet 
                gambling' means to place, receive, or otherwise 
                knowingly 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 or Tribal 
                lands in which the bet or wager is initiated, received, 
                or otherwise made.
                    ``(B) Intrastate transactions.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                where--
                            ``(i) the bet or wager is initiated and 
                        received or otherwise made exclusively within a 
                        single State;
                            ``(ii) the bet or wager and the method by 
                        which the bet or wager is initiated and 
                        received or otherwise made is expressly 
                        authorized by and placed in accordance with the 
                        laws of such State, and the State law or 
                        regulations include--
                                    ``(I) age and location verification 
                                requirements reasonably designed to 
                                block access to minors and persons 
                                located out of such State; and
                                    ``(II) appropriate data security 
                                standards to prevent unauthorized 
                                access by any person whose age and 
                                current location has not been verified 
                                in accordance with such State's law or 
                                regulations; and
                            ``(iii) the bet or wager does not violate 
                        any provision of the--
                                    ``(I) Interstate Horseracing Act;
                                    ``(II) Professional and Amateur 
                                Sports Protection Act;
                                    ``(III) Gambling Devices 
                                Transportation Act; or
                                    ``(IV) Indian Gaming Regulatory 
                                Act.
                    ``(C) Intratribal transactions.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                where--
                            ``(i) the bet or wager is initiated and 
                        received or otherwise made exclusively--
                                    ``(I) within the Indian lands of a 
                                single Indian tribe (as those terms are 
                                defined by the Indian Gaming Regulatory 
                                Act); or
                                    ``(II) between the Indian lands of 
                                2 or more Indian tribes to the extent 
                                that intertribal gaming is authorized 
                                by the Indian Gaming Regulatory Act;
                            ``(ii) the bet or wager and the method by 
                        which the bet or wager is initiated and 
                        received or otherwise made is expressly 
                        authorized by and complies with the 
                        requirements of--
                                    ``(I) the applicable tribal 
                                ordinance or resolution approved by the 
                                Chairman of the National Indian Gaming 
                                Commission; and
                                    ``(II) with respect to class III 
                                gaming, the applicable Tribal-State 
                                Compact;
                            ``(iii) the applicable tribal ordinance or 
                        resolution or Tribal-State compact includes--
                                    ``(I) age and location verification 
                                requirements reasonably designed to 
                                block access to minors and persons 
                                located out of the applicable Tribal 
                                lands; and
                                    ``(II) appropriate data security 
                                standards to prevent unauthorized 
                                access by any person whose age and 
                                current location has not been verified 
                                in accordance with the applicable 
                                tribal ordinance or resolution or 
                                Tribal-State Compact; and
                            ``(iv) the bet or wager does not violate 
                        any provision of the--
                                    ``(I) Interstate Horseracing Act;
                                    ``(II) the Professional and Amateur 
                                Sports Protection Act;
                                    ``(III) the Gambling Devices 
                                Transportation Act; or
                                    ``(IV) the Indian Gaming Regulatory 
                                Act.
                    ``(D) Interstate horseracing.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                that is governed by and complies with the Interstate 
                Horseracing Act of 1978.
                    ``(E) Intermediate routing.--The intermediate 
                routing of electronic data shall not determine the 
                location or locations in which a 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 depository institution.--The term 
                `insured depository institution'--
                            ``(i) has the same meaning as in section 3 
                        of the Federal Deposit Insurance Act; and
                            ``(ii) includes 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. 5363. Prohibition on acceptance of any financial 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. Policies and procedures to identify and prevent restricted 
              transactions
    ``(a) Regulations.--Before the end of the 270-day period beginning 
on the date of the enactment of this subchapter, the Secretary, in 
consultation with the Board of Governors of the Federal Reserve System 
and the Attorney General, shall prescribe regulations requiring each 
designated payment system, and all participants therein, to identify 
and prevent restricted transactions through the establishment of 
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 subparagraph (A).
            ``(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 under subsection (a), the Secretary shall--
            ``(1) identify types of policies and procedures, including 
        nonexclusive examples, which would be deemed, as applicable, to 
        be reasonably designed to identify, block, or prevent the 
        acceptance of the products or services with respect to each 
        type of restricted transaction;
            ``(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 Secretary 
        finds that it is not reasonably practical to identify and 
        block, or otherwise prevent, such transactions.
    ``(c) Compliance With Payment System Policies and Procedures.--A 
financial transaction provider shall be considered to be in compliance 
with the regulations prescribed under 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) 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 transaction--
            ``(1) that is a restricted transaction;
            ``(2) that such person reasonably believes to be a 
        restricted transaction; or
            ``(3) as a member of a designated payment system in 
        reliance on the policies and procedures of the payment system, 
        in an effort to comply with regulations prescribed under 
        subsection (a),
shall not be liable to any party for such action.
    ``(e) Regulatory Enforcement.--The requirements of this section 
shall be enforced exclusively 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. 5365. 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 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, may institute proceedings 
                under this section to prevent or restrain a violation 
                or a threatened violation of this subchapter.
                    ``(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, in accordance 
                with rule 65 of the Federal Rules of Civil Procedure.
            ``(2) Institution by state attorney general.--
                    ``(A) In general.--The attorney general (or other 
                appropriate State official) of a State 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 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 (25 U.S.C. 2710) shall be 
                        carried out in accordance with that compact.
                    ``(B) 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.
    ``(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, 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 
                under section 5367;
                    ``(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(d) of title 18, 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.
    ``(e) Limitation on Injunctions Against Regulated Persons.--
Nothwithstanding any other provision of this section, and subject to 
section 5367, no provision of this subchapter shall be construed as 
authorizing the Attorney General of the United States, or the attorney 
general (or other appropriate State official) of any State to institute 
proceedings to prevent or restrain a violation or threatened violation 
of this subchapter against any financial transaction provider with 
respect to the designated payment system (or systems) of the financial 
transaction provider.
``Sec. 5366. Criminal penalties
    ``(a) In General.--Whoever violates section 5363 shall be fined 
under title 18, 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. 5367. Circumventions prohibited
    ``Notwithstanding section 5362(2), a financial transaction 
provider, or any interactive computer service or telecommunications 
service, may be liable under this subchapter if such person 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.''.
    (b) Technical and Conforming Amendment.--The table of sections for 
chapter 53 of title 31, United States Code, is amended by adding at the 
end the following:
 ``subchapter iv--prohibition on funding of unlawful internet gambling
``5361. Congressional findings and purpose.
``5362. Definitions.
``5363. Prohibition on acceptance of any financial instrument for 
                            unlawful Internet gambling.
``5364. Policies and procedures to identify and prevent restricted 
                            transactions.
``5365. Civil remedies.
``5366. Criminal penalties.
``5367. Circumventions prohibited.''.

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