[Congressional Record Volume 148, Number 126 (Tuesday, October 1, 2002)]
[House]
[Pages H6839-H6848]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
LEACH-LaFALCE INTERNET GAMBLING ENFORCEMENT ACT
Mr. LEACH. Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 556), to prevent the use of certain bank instruments for
unlawful Internet gambling, and for other purposes, as amended.
The Clerk read as follows:
H.R. 556
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.
[[Page H6840]]
(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,
[[Page H6841]]
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''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Iowa (Mr. Leach) and the gentleman from New York (Mr. LaFalce) each
will control 20 minutes.
The Chair recognizes the gentleman from Iowa (Mr. Leach).
General Leave
Mr. LEACH. Madam Speaker, I ask unanimous consent that all Members
may have 5 legislative days within which to revise and extend their
remarks on this legislation and to insert extraneous material.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Iowa?
There was no objection.
Mr. LEACH. Madam Speaker, I yield myself such time as I may consume.
First, let me express my gratitude to the gentleman from Ohio (Mr.
Oxley), the gentleman from Wisconsin (Mr. Sensenbrenner), the gentleman
from New York (Mr. LaFalce), the gentleman from Alabama (Mr. Bachus),
the gentlewoman from New York (Mrs. Kelly), the gentleman from Virginia
(Mr. Goodlatte), the gentleman from Virginia (Mr. Wolf), the gentleman
from Nebraska (Mr. Osborne), the gentleman from Michigan (Mr. Rogers),
as well as the gentleman from Pennsylvania (Mr. Pitts) for their
commitment and leadership on this subject.
I would also like to express my appreciation to groups ranging from
the Christian Coalition to the Family Research Council, from the NCAA
to the NFL and Major League Baseball for their support of this
legislation.
The problem posed by Internet gambling is one we ignore at our peril.
Gambling on the Internet is fast becoming one of the most critical
issues confronting the American family. Casino gambling as it has been
sanctioned in Western democracies is only allowed to exist with
comprehensive regulation, to protect participants from fraud, and to
prevent criminal manipulation of the industry. Generally, casinos also
add entertainment and involve elements of socialization. Gambling
alone, on the other hand, whether using a laptop at home or computer in
the workplace, involves no entertainment or socialization element and
lacks the fundamental protections of law and regulation.
The very characteristics that make the Internet such a valuable
resource are also the reasons why it has such huge potential to impinge
on the stability of the American family, American financial
institutions, and our national security. The easy access, anonymity,
and speed of transactions which make such positive contributions to
efficiency and cost for legitimate American enterprises also in the
case of gambling make safeguards for society impractical. Internet
gambling increases consumer debt, makes bankruptcy more likely, money
laundering an easy endeavor, and identity theft a likely burden.
The financial and economic implications of Internet gambling cannot
be exaggerated. It is simply not good for the economy at large to have
Americans send billions to overseas Internet casinos which often have
shady or unknown owners. Nearly 80 percent of the money handed over to
this industry is impossible to account for because these illegal
gambling sites are located in the Caribbean or other jurisdictions with
no effective regulation of gambling.
[[Page H6842]]
By definition, activities of these gambling sites are illegal under
U.S. law, which means that over 1 million Americans are giving their
personal financial information to criminals on a daily basis. Because
this industry cannot and is not regulated, there is no way to track how
this personal financial information is being used or by whom.
The FBI has testified that Internet gambling is a haven for money
laundering and that Internet gambling remains a loophole in our fight
against terrorist financing. Additionally, a recent GAO report
highlights the ease at which criminal proceeds can be obscured through
Internet gambling. Given the commitment of this Congress to quash the
money-laundering efforts of terrorists and narco-traffickers, it would
be irresponsible to leave such an enormous institutional loophole
unplugged.
It is a myth to think that gambling alone only affects gamblers.
Gambling losses and the resulting debt spill over to the financial and
social services system and to those who may never engage in gambling.
Not only does Internet gambling put strains on financial standing but
those who become addictive gamblers frequently find themselves
contemplating divorce and in some cases suicide.
This bill, which represents the group efforts of the Committee on
Financial Services and the Committee on the Judiciary, gives law
enforcement new tools to enforce existing laws in a three-pronged
approach.
First, it creates a new crime--accepting identifiable instruments
such as credit cards or fund transfers for debts incurred in illegal
Internet gambling. Secondly, because the perpetrators of this crime are
often offshore and beyond the reach of traditional law enforcement, the
bill enables State and Federal Attorneys General to request that
injunctions be issued to any party such as a financial institution,
credit card company, Internet service provider, computer software
provider, to assist in the prevention and restraint of this crime. And,
thirdly, the bill allows Federal bank regulators to create rules which
will require financial institutions to use designated methods to filter
illegal Internet gambling transactions.
In conclusion, let me just stress that at a personal level I am a
skeptic about all forms of gambling, but each of us is obligated to the
maximum extent possible to be respectful of legitimate choices made by
others. The problem is that Internet gambling serves no legitimate
purpose in our society. It is a danger to the family. It is a danger to
society at large. It should be ended.
Madam Speaker, I reserve the balance of my time.
{time} 1600
Mr. LaFALCE. Madam Speaker, I yield myself such time as I may
consume.
(Mr. LaFALCE asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE. Madam Speaker, 3 years have passed since the
congressionally mandated National Gambling Impact Study Commission
released its final report on gambling in the United States. While
reaffirming the principle of State regulation of gambling, the
commission did make an important exception for Internet gambling. The
report called on Congress to enact legislation to restrict illegal
Internet gambling, and specifically, legislation to prohibit wire
transfers and other payments to known Internet gambling sites.
The bill before us today implements this important recommendation of
the national commission. Contrary to what some would have us believe,
the bill does not purport to prohibit Internet gambling, nor interfere
with any State and tribal rights to regulate gambling within their
jurisdiction.
Internet gambling is already illegal under a variety of Federal
statutes. What the bill does is provide new enforcement tools for
blocking credit card, wire transfer and other forms of payment to
illegal Internet gambling sites identified by law enforcement. It
simply blocks the payments that permit on-line betting and makes
Internet gambling possible.
Any American with a computer and a credit card can find numerous
opportunities for high-stakes gambling on the Internet. The number of
Internet gambling sites has grown geometrically in recent years. Where
the National Commission identified approximately 90 online casinos in
1998, a recent study by Bear Stearns & Company estimated that there are
now more than 1,500 such sites. The typical Internet gambling operation
is located in places such as Antigua or the Netherlands Antilles, which
impose little regulatory scrutiny other than collecting licensing fees.
This should make most of these sites highly suspect.
There is no meaningful way to determine the legitimacy of the games
or the gambling operators. There are little or no protections against
security breaches, hacking, diversion of credit card payments or
identity theft.
More importantly, there is a high probability that many offshore
gambling operations are being used as part of money laundering and
other criminal operations, including terrorist financing. The FBI
director recently testified before us and said offshore Internet
gambling is a substantial problem as a loophole in our fight against
terrorist financing.
Despite these obvious problems, online gambling continues to attract
gamblers and has become extremely lucrative for both the site operators
and the host countries. Combined annual revenues received by Internet
gambling sites nearly tripled between 1999 and 2001 from $1.3 billion
to $3.1 billion, and this year revenues will easily exceed $4 billion.
Over 80 percent of the bets received by Internet gambling sites come
from the United States, and almost all of this is illegal under United
States law. The very features that make the Internet so attractive, its
accessibility, convenience and anonymity, combine to enable and
encourage ordinary people to break the law. The Internet breaks down
inhibitions to violate the law because the risks appear so much lower.
As ``Business Week'' noted last week, people who would not even jaywalk
find themselves bombarded with offers to place bets at offshore casinos
that are hard to resist.
The national commission emphasized that the social and economic
problems associated with traditional gambling will increasingly be
exacerbated by Internet gambling. The problems with compulsive
gambling, which were largely confined to areas that legalized high-
stakes casino gambling, can now be found virtually anywhere where there
is a personal computer. This poses significant risks for our Nation's
youth.
A number of factors converge to make today's youth particularly
vulnerable to the lure of Internet gambling. They are more experienced
and comfortable with computers than their parents and have grown up
playing a wide variety of computer and video games, and most have broad
access to the Internet, and large numbers of youth now have access to
some form of credit, debit or stored-value cards to make online bets.
Banks and credit card companies have aggressively marketed credit cards
on college campuses for years and have recently initiated new programs
to market stored-value cards to high school-aged youth.
A young person sitting alone, whether at home or in a college
dormitory with a laptop, can gain access to thousands of gambling sites
across the world and can easily run up the credit line on their own
credit cards or parents' credit cards on games that appear little
different than the computer card games they have played since
childhood. It seems an easy opportunity to win a big jackpot, could
result in financial losses that could harm their families and destroy
their future plans.
Madam Speaker, this is a problem that must be dealt with. The bill
does it in a surgical manner. It does it by blocking the source of
credit, blocking the use of that credit card so that kids in their
college dormitory rooms will not be able to gamble at thousands of
casino online sites across the world.
The issue that needs to be addressed is how we can protect our
nation's youth from the growing availability and potential negative
consequences of Internet gambling. To me, the answer is simple. We cut
off Internet gambling at its soruce by prohibiting the primary payment
vehicles that make illegal on-line betting possible. H.R. 556 would
prohibit known Internet gambling sites from accepting any check, credit
card, debit card or other form of electronic transfer as payment of any
bet or wager over the Internet. The effect of this prohibition is to
deny known Internet gambling
[[Page H6843]]
sites from being approved for credit card, debit and other electronic
transfer accounts. This is currently being done voluntarily by numerous
credit card banks--including American Express, Bank of America,
Providian, Citibank and Discover--and there is substantial
justification for making this practice obligatory for all institutions
and payment networks.
The bill incorporates proposals suggested by Visa and MasterCard that
would permit payment transfer networks to establish policies and
procedures for identifying and blocking payments to known Internet
gambling sites. Financial institutions who are members of these
networks and follow these procedures would be considered in compliance
under the bill. I believe this is a reasonable accomodation that will
expand the means to block illegal gambling payments and also ease the
compliance concerns and burdens of individual institutions.
H.R. 556 is endorsed by many of the nation's largest credit card
companies and by the largest online payment service, PayPal. It is
supported by a growing number of Internet service providers and their
trade groups, including NetCoalition.com and the United States Telecom
Association. It is supported by law enforcement groups at all levels,
including the FBI, the Federal Law Enforcement Officers Associaiton and
the Fraternal Order of Police. And it has the support of religious and
family organizations across the nation.
Madam Speaker, the time has come to protect our youth from the
unnecessary and potentially disastrous consequences of Internet
gambling. It is time to eliminate Internet gambling as a convenient
financial tool for criminals and terrorists. And it is time to provide
law enforcement with the tools its needs to address this growing
illegal activity. H.R. 556 can achieve all of these important
objectives and deserves our support.
Madam Speaker, I reserve the balance of my time.
Mr. LEACH. Madam Speaker, I yield 3\1/2\ minutes to the gentleman
from Ohio (Mr. Oxley), the chairman of the Committee on Financial
Services, who has led this effort with great distinction.
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Madam Speaker, this bill is the product of a lot of hard
work on the part of many Members, and I want to pay special tribute to
the gentleman from Iowa (Mr. Leach) for his dogged determination, as
well as the hard work of the gentleman from New York (Mr. LaFalce) in
maybe his last major effort on a piece of legislation. Well, we hope to
get to terrorism insurance before we adjourn; but the gentleman's work
has been extraordinary, along with the gentleman from Virginia (Mr.
Goodlatte) as well as the gentleman from Virginia (Mr. Wolf) for their
efforts.
This bill has been touted by a number of groups, Madam Speaker. It
enjoys universal support from family and religious groups, antigambling
groups, professional sports, college athletics, major players in the
banking and credit card industries, and law enforcement and Internet
service providers. The list goes on and on and is getting larger every
day. This is why this bill needs to pass, because of its broad base of
support.
Five years ago, Internet gambling was almost nonexistent. The
Internet was just coming into its own; but apparently this kind of
activity abhors a vacuum, and we have seen a huge growth of this type
of gambling taking place, preying on the most vulnerable in our
society, including our college-aged students and people who can least
afford it.
We heard testimony in the committee from the Department of Justice
and the FBI that Internet gambling serves as a haven for money
launderers and that unregulated offshore gambling sites can be
exploited by terrorists to launder money. That position was reiterated
just recently by FBI Director Mueller when he cited Internet gambling
as a substantial problem for law enforcement.
We know of at least two open cases before the bureau involving
Internet gambling as a conduit for money laundering by organized crime.
The GAO, in an interim report to our committee, highlighted law
enforcement's concerns with Internet gambling and its vulnerability to
money laundering, ``including the volume, speed, and international
reach of Internet transactions and the offshore locations of Internet
gambling sites'' which ``can promote a high level of anonymity and give
rise to difficult jurisdictional issues.''
The Financial Action Task Force, an international body that seeks to
combat money laundering, stated in a February 2001 report that some
member countries had evidence that criminals were using Internet
gambling to launder their illicit funds.
For the record, let us make clear what the bill does and what it does
not do. It does prohibit the acceptance of U.S. financial instruments,
such as credit cards, for use in unlawful Internet gambling
transactions. By so doing, it cuts off the financial lifeblood of the
illegal Internet gambling industry. It does not expand gambling in any
way, shape or form. Those who claim otherwise are not telling the
truth, or they simply do not get it.
The bill's provisions kick in only where a court or banking regulator
determines that an illegal activity is taking place and relies on
current Federal and State law to guide it in that determination.
H.R. 556 protects the right of States to regulate gambling within
their borders. It neither expands nor limits gambling beyond what is
allowed under existing Federal, State, and tribal law.
This bill represents legislation at its best. It is a direct approach
to a serious problem. It will give law enforcement an important new
tool to fight crime and will protect families throughout America. It
deserves the support and vote of every Member of this House.
Mr. LaFALCE. Mr. Speaker, I yield 4 minutes to the gentleman from
Michigan (Mr. Conyers), the ranking member of the Committee on the
Judiciary.
Mr. CONYERS. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, this is a bill that had joint jurisdiction at one time.
The Committee on Financial Services and the Committee on the Judiciary
were working on it together. It is interesting that the Committee on
the Judiciary came forward with a bill that affirmed that all Internet
wagers were illegal. But what happened?
On page 6 of the bill that is before us, we find that all Internet
gambling transactions are illegal, except ``any transaction authorized
under State law with a business licensed or authorized by a State.''
Mr. Speaker, I refer Members to this crucial phrase, a legal phrase.
Contrary to the Wire Act of 1949, which has already made any interstate
gambling by wire illegal, we have created this wonderful little
exception. I wonder what it means. And I wonder why the credit card
companies are for this bill if they are prohibited from the bill.
And would somebody in the course of this brief discourse before us on
this suspension explain to me how the Christian Right, a great group of
American patriots in this country, have been persuaded that this bill
bans gambling on the Internet; but yet two other industries, the horse
racing industry, is supporting this bill because they are persuaded it
does not, and State lotteries are found to be supporting the bill
because they feel that they will be exempted under this beautiful
little provision, section (ix) on page 6, which says any lawful
transaction with a business licensed or authorized by the State is
exempt from this bill.
We cannot have it both ways. So we are doing nothing here but making
some wonderfully effective speeches about what we are stopping from
happening on the Internet, but somebody besides the Committee on the
Judiciary must be aware that this is not the case.
Mr. LEACH. Mr. Speaker, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Iowa.
Mr. LEACH. Mr. Speaker, nothing in this bill is designed to overturn
the Wire Act, Federal prohibitions on lotteries, or the Gambling Ship
Act.
Mr. CONYERS. Reclaiming my time, this bill exempts any lawful
transaction with a business licensed or authorized by the State,
including lotteries. The gentleman must know that is a State business.
Mr. LEACH. Mr. Speaker, if the gentleman would continue to yield,
only for intra-, not inter-, state and only if authorized by the State
law of the State.
This bill is an enforcement mechanism that stops the ability of all
interstate Internet gambling.
[[Page H6844]]
{time} 1615
Mr. CONYERS. Let me ask the gentleman, why are they supporting the
bill?
Mr. LEACH. It is in the national interest.
Mr. CONYERS. I thank the gentleman.
Mr. LEACH. Mr. Speaker, I yield 4 minutes to the distinguished
gentleman from Alabama (Mr. Bachus), who has led this fight so well.
Mr. BACHUS. Mr. Speaker, I think my comments may shed some light on
the last speaker and some of what he said.
Imagine, if you will, if you heard news from home that they had built
a casino next to your house, and, worse than that, they had invited
your kids over to gamble in the casino which was built next door. You
would say that was about as bad a news as you could receive. But it is
actually worse than that. Sitting right on the computer desk in your
home, or better still up in your child's bedroom, is a computer. On
that computer today, there is a child-accessible casino, because we
have got 1,500 offshore, and they are offshore, this may address the
last speaker's concerns, because it is against the law in all 50 States
to operate these Internet gambling sites. It is against the law in all
the States, so they are all offshore. Your child could go in, he could
turn on his computer, and he could gamble.
Mr. Speaker, I have five children. I knew nothing about this. We
ought to thank the gentleman from Iowa (Mr. Leach) and the gentleman
from Virginia (Mr. Goodlatte). It is also, I think, fortuitous that the
gentleman from Iowa sits on the Committee on Financial Services and the
gentleman from Virginia sits on the Committee on the Judiciary, because
I know that the gentleman from Virginia will continue to do what he can
in the Committee on the Judiciary, and this bill which the gentleman
from Iowa has offered is going to go a long way.
What about the demographics? What did we hear? We heard that in the
over-65 age group, only 1 in 10 senior citizens in that group uses a
computer as a hobby or to pursue their interests in an active way. We
heard that 7 out of 10 in the 18-to-24 group use a computer. American
Demographics, a study 2 years old, 7 out of 10 18-to-24-year-olds are
on the computer. A survey for Public Participation in the Arts did a
study about 5 years ago, and they said that the average teenager or
college student is spending 4 hours on the computer.
What else do we know about college kids? Eighty percent of them have
credit cards. What do they need to play on the Internet? All they need
is the use of a computer, which they are on 4 hours a day, and a credit
card. They have that.
Are they doing it? You bet they are doing it. The NCAA came to us and
told us testimony about students losing $10,000, $5,000. Gambling
addiction by college students as a result partially of Internet
gambling on these illegal sites is reaching epidemic proportions.
I guess the most chilling testimony, and I will close with this, is
what Dr. Howard Shaffer at Harvard University said. He said, I would
compare what this illegal Internet gambling is doing to our youth in
the gambling spectrum to what we saw with the introduction of crack
cocaine, where it changed the drug experience and caused millions of
people to become addicted within a year or two. He said the same thing
is happening today with illegal Internet gambling.
We have got to move against it. I commend the gentleman from
Virginia. I commend the gentleman from Iowa. This bill shuts off the
money. That is what these people are there for, the money. If we shut
off the money, we shut off the sites.
Mr. LaFALCE. Mr. Speaker, I reserve the balance of my time.
Mr. LEACH. Mr. Speaker, I yield 2 minutes to the distinguished
gentlewoman from New York (Mrs. Kelly).
Mrs. KELLY. I thank the gentleman from Iowa for yielding me this
time.
Mr. Speaker, I would like to enter into a colloquy with the gentleman
from Iowa, the author of this bill.
Certain State, tribal and private entities have raised concerns, and
I would like to clarify the intention of the drafters of H.R. 556 on
one point. Section 3, subsection (b)(1)(E)(ix) exempts from the bill's
provisions lawful transactions carried out with a business licensed or
authorized by a State. Some parties have raised concerns that this
could be read broadly to allow the transmission of casino or lottery
games in interstate commerce, for example, over the Internet, simply
because one State authorizes its businesses to do so.
I want to make clear that this exception will not expand the reach of
gambling in any way. It is simply intended to recognize current law,
which allows States jurisdiction over wholly intrastate activity, not
interstate but intrastate activity, where bets or wagers, or
information assisting bets or wagers, do not cross State lines or enter
into interstate commerce. The exemption would leave intact the current
interstate gambling prohibitions such as the Wire Act, Federal
prohibitions on lotteries, and the Gambling Ship Act so that casino and
lottery games could not be placed on the Internet.
Put another way, this exemption does not allow for interstate
wagering. For example, under this bill a resident of one State could
not legally use the Internet to purchase a lottery ticket in another
State. This exemption is simply intended to recognize current law,
which allows States to regulate wholly intrastate gambling activity and
would leave intact the current Wire Act, which prohibits interstate
gambling. Is that correct?
Mr. LEACH. Mr. Speaker, will the gentlewoman yield?
Mrs. KELLY. I yield to the gentleman from Iowa.
Mr. LEACH. Mr. Speaker, the gentlewoman's assessment is entirely
accurate. I thank the gentlewoman for clarifying this point.
Mrs. KELLY. Reclaiming my time, Mr. Speaker, I thank the gentleman
for that clarification. I strongly support this legislation and urge my
colleagues to join us in standing against illegal Internet gambling and
voting for this bill.
In a few short years, the Internet gambling industry has exploded.
According to an Internet gambling committee of the National Association
of Attorneys General, there were less than 25 such sites on the Web in
the mid-1990s. Bear Stearns, one of the nation's leading securities
firms, estimates that there are between 1,200 and 1,400 e-gaming Web
sites. Bear Stearns projects that as the industry continues to grow;
such Internet sites could generate an estimated $5 billion in revenues
by 2003. That figure approximates roughly half of last year's casino
earnings in the State of Nevada.
Internet gambling presents a complex set of legal, financial,
technical, and social challenges. On the legal front, it is believed
that most forms of interstate Internet gambling are prohibited by
Federal law under the Interstate Wire Act in Section 1084 of Title 18
of the U.S. Code. For years, authorities have used the Wire Act to
combat illegal betting by phone or other wire communications. Now, with
the advent of Internet technology, the Wire Act and other related
provisions of Federal law also stand as a legal obstacle against the
establishment of Internet casinos on U.S. soil.
The most serious offenders in the Internet gambling arena are the
virtual casinos operating offshore, beyond the research of U.S. law.
One estimate puts the number of foreign jurisdictions authorizing or
tolerating Internet gambling at fifty. This includes not just the well-
known bank secrecy jurisdiction of the Caribbean but other countries
like Australia.
The lure of lucrative licensing fees and the possibility of sharing
in gambling receipts are proving to be powerful incentives to enter the
Internet gambling business. Antigua and Barbuda have reportedly
licensed more than 80 Internet gaming websites already, charging a
$75,000-$85,000 licensing fee for a sports betting site and $100,000
for a virtual casino. A report prepared for the South African
government, as reported in the Bear Stearns study, revealed that
Internet gaming revenues could yield up to $140 million in foreign
exchange.
While Internet gambling represents a jackpot for such foreign
justifications, it is a wheel of misfortune for far too many Americans
who struggle with gambling addictions and the loss of jobs, wrecked
marriages, and destroyed finances that often follow. With a click of a
computer mouse, any American armed with a credit card can have instant,
anonymous access to round-the clock gambling from the privacy of their
homes. All of the social hazards associated with problem gambling at
brick-and-mortar sites are of equal, if not greater, concern when it
comes to on-line gambling.
Furthermore, Internet gambling poses a serious problem to our youth.
In the areas in
[[Page H6845]]
which gambling is legal, strict laws have been enacted to ensure our
children are prohibited from participating. In many homes the children
are far more computer literate than the parents. What possibly would
stop a child from placing a bet with their parent's credit card? Since
our society has made a conscious decision to keep children from this
activity we must take steps to ensure that online casinos do not
victimize our children. The issue of what can we do to protect children
from these sites will be one of my first questions for our panelists
today.
In addition to the social problems associated with Internet gambling,
U.S. authorities warn that Internet gaming offers a powerful vehicle
for laundering funds from illicit sources as well as to evade taxes. A
2001-2002 Financial Action Task Force (FATF) report on money laundering
typologies indicates that there is evidence in some FATF jurisdictions
that criminals are using the Internet gambling industry to commit crime
and to launder the proceeds thereof. The use of credit cards and the
placement of sites offshore make locating the relevant parties,
gathering the necessary evidence, and prosecuting those parties
difficult if not impossible.
Despite the many problems associated with Internet gambling, there is
clearly money to be made in this business, and U.S. firms are
increasingly eager to claim their share. U.S., software firms, public
relations and advertising companies, and other U.S.-based enterprises
are already knee-deep in the Internet gambling business. Within the
last year, two U.S. companies--MGM Mirage and Harrah's--have announced
new on-line play-for-free or play-for-prizes operations that are but a
short step away from actual Internet gambling. Nevertheless, it is
clear that absent strong Congressional action, the United States may be
poised itself to head down the slippery slope of Internet gambling.
In 1999, the Congressionally-mandated National Gambling Impact Study
Commission unanimously recommended a Federal ban on Internet gambling.
Testifying at a hearing before the Banking Committee last Congress,
Commission Member Richard Leone explained that unlike the regulatory
regimes that have accompanied the expansion of other forms of gambling
in the United States, the emergence of Internet gambling has occurred
with no regulatory structure. As a result, the current framework of
Federal and State laws governing gambling can be easily circumvented.
The Commission noted that the problems associated with Internet
gambling include: (1) the potential for abuse by gambling operators who
can alter, move, or entirely remove sites within minutes; (2) the
ability of gambling operators or computer hackers to tamper with
gambling software to manipulate games to their benefit; and (3) the
provision of additional means for individuals to launder money derived
from criminal activities.
The Commission concluded that because Internet gambling crossed state
lines, it would be difficult for States to effectively control it and
that Federal legislation was the only recourse. The Commission further
rejected the argument that Internet gambling could be effectively
regulated. and recommended, instead, a ban on any Internet gambling not
already authorized by law, and without new or expanded exemptions.
Although the States do not normally welcome Federal legislation on such
matters, the National Association of Attorneys General, speaking on
behalf of State Attorneys General, has indicated strong support for
Federal action.
In response to the Commission's recommendations and testimony from
other interested parties, the House Financial Services Committee
approved this legislation now before us, H.R. 556, the Unlawful
Internet Gambling Funding Prohibition Act. This bill tackles the
problem of Internet gambling by prohibiting gambling operations from
accepting credit cards, checks, or other bank instruments in connection
with illegal Internet gambling. The justification for this bill is
simple: if we cut off the internet gambling industry's access to money
it will die.
If we fail to act and pass this legislation I fear that our actions
will be misinterpreted as a green light to those in U.S. industry who
are interested in launching on-line gambling operations of one type or
another. This issue can no longer simply be left to random events and
foreign jurisdictions. It is time for Congress to address these issues
and identify an appropriate public policy response. It is time for
Congress to pass the Unlawful Internet Gambling Funding Prohibition
Act. I ask all my colleagues on both sides of the aisle to join me in
support of this important legislation.
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
Let me point out a little bit of history. In 1994, as chairman of the
Committee on Small Business, I conducted some hearings into the
problems of the proliferation of gambling across the United States of
America. At that time I introduced a bill to create a national
commission to study the impact of gambling. In the November elections
we lost, and the chief cosponsor of my bill was the gentleman from
Virginia (Mr. Wolf).
In the next Congress the gentleman from Virginia became the chief
sponsor of the bill, and I became the chief cosponsor. With his great
leadership and the assistance of a good many groups, and most
especially the Christian Coalition, we were able to get the commission
enacted into law. It had a difficult time getting started, having
members appointed who would give us the type of objective analysis we
wanted, but finally it did render a report, and there was one specific
provision that, as I recall, they were unanimous on, and that was the
issue of Internet gambling.
It has taken us a long time. As soon as they came out with that
recommendation, I introduced a bill in the House that proceeded through
the payment mechanism. The gentleman from Iowa (Mr. Leach) introduced a
bill, too, that took slightly different approaches, although we were
both going in exactly the same direction. The gentleman from Virginia
(Mr. Goodlatte) has been magnificent over the years in pursuing it,
especially in the Committee on the Judiciary and working with the
religious organizations.
Can we nitpick a bill? Sure we can. But as far as I am concerned, if
this bill is not perfect, it is 99 percent close to perfect. It is
pretty good. It is certainly as good as we are going to be able to
pass, and it does block off Internet gambling at its source by going to
the credit card, the debit card, any electronic funds transfer. This is
a growing, growing problem.
I hope, also, there are countless other problems in the United States
of America associated with gambling, that we will have the courage to
deal with those problems, because right now we have legalized gambling
within about a half an hour drive of virtually any spot in the United
States of America. So it is no longer an economic development tour. Now
it is just a way of snaring people's discretionary money, and usually
in preying upon people. It needs far more effective regulation than it
is receiving from either the Federal or the State governments.
We do not deal with all those problems here. We deal with one very,
very narrow but large problem, and that is the problem of Internet
gambling, not just because of the way it is preying on our youth, but
because of the way it is being used for money laundering, the way it is
being used for terrorist activity, et cetera, et cetera. This bill
should be passed unanimously.
Mr. Speaker, I reserve the balance of my time.
Mr. LEACH. Mr. Speaker, I yield 1 minute to the gentleman from
Virginia (Mr. Wolf), one of the Congress' profoundest voices on moral
issues, a great friend and a man I admire greatly.
(Mr. WOLF asked and was given permission to revise and extend his
remarks.)
Mr. WOLF. Mr. Speaker, I want to personally thank the gentleman from
Iowa for staying with this and having the courage, and, as people back
in Iowa ought to know, that because of him this thing is up.
I also thank the gentleman from New York (Mr. LaFalce), who
unfortunately is going to be leaving us, the gentleman from Ohio (Mr.
Oxley) and the gentleman from Virginia (Mr. Goodlatte). Because of them
this bill is here.
To vote against this bill would be unbelievable. If anyone votes
against this bill, I will not understand it. I just appreciate the
gentleman from New York's comments on the critical nature with regard
to the terrorism. The FBI has testified there is a huge potential for
offshore gambling sites being used for money laundering, for terrorist
and criminal activities. We have said it. Terrorist and criminal
activities.
Again, the gentleman from Iowa (Mr. Leach) should be thanked by
everyone in the country. The gentleman from New York (Mr. LaFalce)
should be thanked by everyone in the country, as should the gentleman
from Ohio (Mr. Oxley) and the gentleman from Virginia (Mr. Goodlatte).
They have made a difference and will save a lot of lives and will
really put a stake in the heart with regard to terrorism.
Mr. Speaker, I rise in strong support of H.R. 556 and want to commend
my colleagues Jim
[[Page H6846]]
Leach, John LaFalce, and Mike Oxley and Virginia colleague Bob
Goodlatte for their partnership, their hard work and persistence to get
this bill to the floor today.
The legislation before us has at its heart the kind of consensus
building and compromise that I believe can attract the level of support
needed to pass this important measure to give law enforcement agencies
the tools they need to stop the criminal activity associated with
unlawful Internet gambling.
In 1999, The National Gambling Impact Study Commission issued a
report urging Congress to pass legislation ``prohibiting wire transfers
to known Internet gambling sites, or to the banks that represent
them.'' As the author of the legislation that established the
Commission, I have maintained a keen interest in following through on
its recommendations which included addressing the explosive growth in
Internet gambling.
According to the National Gambling Impact Study Commission, gambling
on the Internet is especially enticing to youth, pathological gamblers,
and criminals. There are currently no mechanisms in place to prevent
youth--who make up the largest percentage of Internet users from using
their parents' credit card numbers to register and set up accounts for
use at Internet gambling sites.
In addition, pathological gamblers may become easily addicted to
online gambling because of the Internet's easy access, anonymity and
instant results. Dr. Howard J. Shaffer, director of addiction studies
at Harvard University, likens the Internet to new delivery forms of
addictive drugs: ``As smoking crack cocaine changed the cocaine
experience, I think electronics is going to change the way gambling is
experienced.''
Finally, Internet gambling can provide a nearly undetectable harbor
for criminal enterprises. The anonymity associated with the Internet
makes online gambling more susceptible to crime.
In 2001, Chairman Leach and Chairman Goodlatte listened to the
Commission's request and introduced two separate bills to fight illegal
Internet gambling. Over the August recess, provisions from the two
measures were combined into an amended version of H.R. 556, the Leach-
LaFalce Internet Gambling Enforcement Act, which is before us today.
This balanced compromise worked out between the Financial Services
and Judiciary committees makes it a crime to accept payment for illegal
Internet gambling transactions by credit card, check, or electronic
funds transfer. Under the bill, banks and credit card companies would
be required to block payments to Internet casinos and other illegal
Internet gambling operations. As a testament to the fairness of this
bill, it has attracted the support of the major issuers of credit cards
including Bank of America, MBNA America, American Express, Citigroup,
and Discover Financial Services, among others.
The negative consequences of online gambling can be as detrimental to
the families and communities of addictive gamblers as if a bricks and
mortar casino were built right next door. Internet gambling is
affiliated with a host of social ills, including gambling addiction,
bankruptcy, divorce, and even suicide and just as with traditional
forms of gambling, the costs must ultimately be borne by society.
As the gambling commission noted, one of the most troubling aspects
of Internet gambling is that many of those enticed into addictive
online gambling behavior are school-aged children with no previous
exposure to gambling. Internet gambling also has been linked to
specific cases of corruption in professional and amateur sports.
As a result, H.R. 556 has been endorsed by a host of anti-gambling
organizations, including the American Family Association, Christian
Coalition of America, Concerned Women for America, Focus on the Family,
Family Research Council, the Traditional Values Coalition, the National
Collegiate Athletic Association, the National Football League and Major
League Baseball, among others.
There is one final and perhaps most critical issue that unlawful
Internet gambling raises--Internet gambling has been linked by the FBI
to organized crime and international money laundering.
The FBI has testified that there is a huge potential for offshore
gambling sites to be used for money laundering for terrorist and
criminal activity. The FBI and law enforcement organizations including
the Federal Law Enforcement Officers Association and the Fraternal
Order of Police agree about the necessity for this legislation to
thwart Internet gambling operators attempts to launder money and engage
in terrorist and other illegal activities.
Mr. Speaker, it is time for this Congress to address the growing
problems associated with illegal Internet gambling. I urge a unanimous
vote for H.R. 556, and again want to express my deep gratitude to Mr.
Leach, Mr. LaFalce, Mr. Oxley and Mr. Goodlatte for their commitment
and their work to pass this legislation.
Mr. LaFALCE. Mr. Speaker, I yield myself 30 seconds. I just want to
point out that one of the individuals who was arrested and living in
Lackawanna a few weeks or so ago was found to have expended $89,000 at
Casino Niagara in Niagara Falls, Canada. The Governor of the State of
New York now has an application pending with the Department of the
Interior to establish Indian gambling in Niagara Falls, New York. So
these individuals would not have had to go to Canada if we are able to
establish Indian gambling in Niagara Falls. They would be able to go to
Niagara Falls, New York, to do whatever they want with their money.
Mr. LEACH. Mr. Speaker, I yield 3 minutes to the gentleman from
Virginia (Mr. Goodlatte), who has worked harder on this issue and is
more thoughtful on this subject than anyone in the history of the
Congress.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from
Virginia (Mr. Goodlatte).
(Mr. GOODLATTE asked and was given permission to revise and extend
his remarks.)
Mr. GOODLATTE. Mr. Speaker, I would like to start by thanking the
gentleman from Iowa for yielding me this time and for his perseverance.
I know that his work on this dates back a long time, including to when
he was chairman of the Committee on Financial Services.
Likewise, I thank the gentleman from New York (Mr. LaFalce). He and I
have had many conversations and have worked on this for a long time. I
know his dedication to dealing with this problem.
Likewise, I thank the gentleman from Wisconsin (Mr. Sensenbrenner),
and the gentleman from Texas (Mr. Smith) of the Committee on the
Judiciary, and the gentleman from Ohio (Mr. Oxley), and the gentleman
from Alabama (Mr. Bachus) of the Committee on Financial Services for
their hard work on this as well.
Mr. Speaker, just over 40 years ago, Attorney General Robert Kennedy
in the midst of a fight in the war against organized crime sent
legislation to Congress targeted at organized crime to crack down on
gambling over telephone wires. That legislation was passed by the
Congress, signed into law and has become commonly known as the Wire
Act. However, because the Internet does not always travel over
telephone wires, this law, which was written before the invention of
the World Wide Web, has become outdated. Therefore, it is fitting that
40 years after enactment of the Wire Act and in the midst of a new war
on terrorism, we are considering legislation to update the Wire Act to
clarify the state of the law by bringing the current prohibition
against wireline interstate gambling up to speed with the development
of new technology.
{time} 1630
I have long been a champion of the Internet and an advocate of
limited government regulation of this new medium. However, that does
not mean that the Internet should be a regulatory free zone or that our
existing laws should not apply to the Internet. I think we can all
agree that it would be very bad public policy to allow offline activity
deemed criminal by States to be freely committed online and to go
unpunished simply because we are reluctant to apply our laws to the
Internet.
Gambling on the Internet has become an extremely lucrative business.
Numerous studies have charted the explosive growth of this industry,
both by the increases in gambling Web sites available and via industry
revenues.
Almost all of the more than 1,400 Internet gambling sites are
offshore. Why? Because they seek to evade the laws of this country.
This bill is directly targeted at those scofflaws sucking billions of
dollars out of this country who are unaccountable to the people who go
online and place bets, not knowing whether they are going to get fair
odds, not knowing whether they are even going to get paid. This indeed
will be very effective, so I commend the gentlemen from Iowa and New
York.
Mr. Speaker, it adds three provisions from the Committee on the
Judiciary bill, which was a tough bill and which I would love to see
passed. But we have spent a long time juggling the interests of all of
the various legal gambling organizations, and this approach is the
right approach at this time, just targeting the offshore folks.
[[Page H6847]]
I want to explain to everybody these three provisions. They are very
important and valuable additions to the Committee on Financial Services
bill. First, there is a provision that will allow law enforcement to
obtain the cooperation of Internet service providers to not only deal
with the credit cards and other financial transactions, but to require
the taking down of those prolific ads on the Internet where you can
click here and be at some offshore site. Those ads, if they are
involving an entity that is engaged in illegal activity, will be
subject to being taken down with a court order by the Internet service
providers.
Secondly, it increases the penalties for violating the Wire Act from
2 years to 5 years. Finally, it makes it clear, and this is vitally
important, it makes it clear that despite the changes in technologies,
these new technologies being deployed today do not bypass the Wire Act.
It makes it clear that the Wire Act applies regardless of the
technology.
So I urge my colleagues to support this fine legislation.
A study by the research group Christiansen/Cumming Associates
estimated that between 1997 and 1998, Internet gambling more than
doubled, from 6.9 million to 14.5 million gamblers, with revenues
doubling from $300 million to $651 million. More recently, Bear,
Stearns & Co. Inc. reported that there were at that time as many as
1,400 gambling sites, up from 700 just a year earlier. Other estimates
indicate that Internet gambling could soon easily become a $10 billion
a year industry.
Almost all virtual betting parlors accepting bets from individuals in
the United States have attempted to avoid the application of United
States law by locating themselves offshore and out of our
jurisdictional reach. These offshore, fly-by-night Internet gambling
operators are unlicensed, untaxed and unregulated and are sucking
billions of dollars out of the United States.
The FBI and the Department of Justice have testified that Internet
gambling serves as a vehicle for money laundering activities and can be
exploited by terrorists to launder money.
The negative consequences of online gambling can be as detrimental to
the families and communities of addictive gamblers as if a bricks and
mortar casino was built right next door. Online gambling can result in
addiction, bankruptcy, divorce, crime, and moral decline just as with
traditional forms of gambling, the costs of which must ultimately be
borne by society.
Internet gambling is especially enticing to youth, pathological
gamblers, and criminals. There are currently no mechanisms in place to
prevent youth--who make up the largest percentage of Internet users--
from using their parents' credit card numbers to register and set up
accounts for use at Internet gambling sites. In addition, pathological
gamblers may become easily addicted to online gambling because of the
Internet's easy access, anonymity and instant results. Dr. Howard J.
Shaffer, director of addiction studies at Harvard, likens the Internet
to new delivery forms of addictive drugs: ``As smoking crack cocaine
changed the cocaine experience, I think electronics is going to change
the way gambling is experienced.'' Finally, Internet gambling can
provide a nearly undetectable harbor for criminal enterprises. The
anonymity associated with the Internet makes online gambling more
susceptible to crime.
Gambling is currently illegal in the United States unless regulated
by the States. As such, every state has gambling statutes to determine
the type and amount of legal gambling permitted. With the development
of the Internet, however, prohibitions and regulations governing
gambling have been turned on their head. Since 1868, the federal
government has enacted federal gambling statutes when a particular type
of gambling activity has escaped the ability of states to regulate it.
For over one hundred years, Congress has acted to assist states in
enforcing their respective policies on gambling when developments in
technology of an interstate nature, such as the Internet, have
compromised the effectiveness of state gambling laws.
The more than 1,400 gambling websites from the Caribbean and
elsewhere are unlicensed, untaxed, and unregulated by any state, and
thus violate all 50 state laws in which they are available. That is why
state attorneys general, pro-family/anti-gambling groups, professional
and amateur sports leagues, and the Department of Justice all agree
that federal legislation is needed to clarify federal law that offshore
Internet gambling businesses are illegal.
The National Gambling Impact Study Commission recommended to Congress
that federal legislation is needed to halt the expansion of Internet
gambling and to prohibit wire transfers to known Internet gambling
sites, or the banks who represent them.
Under current federal law, it is unclear that using the Internet to
operate a gambling business is illegal. The closest useful statute is
the Wire Act which prohibits gambling over telephone wires. However,
because the Internet does not always travel over telephone wires, the
Wire Act, which was written well before the invention of the World Wide
Web, has become outdated--it is not clear that it applies to the
Internet at all.
H.R. 556, as amended by provisions in Internet gambling legislation I
introduced, clarifies the state of the law by amending the Wire Act to
bring the current promotion against wireline interstate gambling up to
speed with the development of new technology. This provision settles
the uncertainty about whether the Wire Act applies to the Internet and
at the request of the Justice Department, makes the Wire Act technology
neutral so that the law applies to both the telephone and the Internet.
Language has also been included in H.R. 556 from my bill that
provides for further cooperation between law enforcement and
Interactive Computer Service Providers to combat illegal Internet
gambling. This provision provides for ISPs to respond to injunctions to
take down illegal gambling websites or websites containing hypertext
links hosted by the ISP. The bill makes clear that such injunctions
would issue only after the opportunity for a hearing, would specify the
service to which the order applies, and provide enough information so
that the interactive computer service could locate the site or
hypertext link. As a result of striking this balance between the
responsibilities of Internet companies and the needs of law
enforcement, the bill has the support of the ISP community.
As the National Gambling Impact Study Commission has documented, and
Senate and House hearings have confirmed, Internet gambling is growing
at an explosive rate. It evades existing anti-gambling laws, endangers
children in the home, promotes compulsive gambling among adults, preys
on the poor, and facilitates fraud. H.R. 556 will put a stop to this
harmful activity before it spread further.
Mr. LEACH. Mr. Speaker, if I could first inquire of my good friend,
the gentleman from New York (Mr. LaFalce), we have two speakers and
only 1\1/2\ minutes remaining.
Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from Iowa
(Mr. Leach).
Mr. LEACH. Mr. Speaker, I thank the gentleman from New York (Mr.
LaFalce) for yielding me time.
Mr. Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr.
Pitts), and I note that the gentleman has worked on this very
assiduously and is a man of great dignity and respect.
Mr. PITTS. Mr. Speaker, first of all, I want to thank and commend the
gentleman from Iowa (Mr. Leach), the gentleman from Ohio (Mr. Oxley),
the gentleman from Virginia (Mr. Goodlatte), and the gentleman from New
York (Mr. LaFalce), and the other sponsors for developing and moving
this important legislation.
In the last couple of decades, gambling has exploded across this
country, both legal and illegal forms of gambling. While many of us are
concerned about legal gambling and its impact on society, this bill is
about illegal gambling.
The Internet has made it possible to gamble away your money to
offshore criminals right from your bedroom. Millions of Americans send
these crooks their money; and up until now, the States have been
powerless to do anything about it. With this bill, we solve the
problem. It may be impossible to keep illegal gambling sites off the
World Wide Web, but it is entirely possible to prevent American credit
cards companies from completing these transactions that these crooks
need to make their money, and that is what this bill does. It does
nothing to roll back legal gambling in this country. This is entirely
about activities that are already against the law and need to be
stopped. Some Americans do not seem to have discretion not to do this;
this will help keep the money out of the hands of illegal people
running these gambling sites, and I urge my colleagues to support the
bill.
Mr. LEACH. Mr. Speaker, I yield 1 minute to the gentleman from
Nebraska (Mr. Osborne), one of Congress's most unique and distinguished
Members.
Mr. OSBORNE. Mr. Speaker, I rise in support of H.R. 556. Like others,
I would like to thank the gentleman from Iowa (Mr. Leach) for his work;
the ranking member, the gentleman from New York (Mr. LaFalce); the
gentleman from Virginia (Mr. Goodlatte); and others for their
leadership.
[[Page H6848]]
The main reason I am here today is that I am really interested in
young people, and I am interested in sports gambling; and of course,
Internet gambling has really lead to an explosion of gambling of
intercollegiate athletics, and that is one reason why the NCAA, the
NFL, and Major League Baseball all support this legislation.
College students often run up huge credit card debts on these sites,
and this is involved with sports betting. According to the Federal
Trade Commission, Internet gambling sites are advertising on Web pages
normally visited by children. A child cannot gamble in a casino or race
track or any other establishment because of age limits, but some young
people are using parents or their own credit cards on these sites. One
really alarming statistic I want to mention: it is estimated that 1.1
million adolescents between the ages of 12 and 18 are pathological
gamblers. This is a higher percentage than adults by age group. Young
people become addicted to alcohol, drugs, and gambling more quickly
than adults because of psychological and physiological immaturity. So I
believe this is especially pernicious and particularly dangerous; and I
urge support of this important legislation.
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
I think this is an extremely important bill. I think it is an
extremely important bill for all Americans, but most especially for our
youth who use computers every single day, hours and hours every day,
and have countless, in the course of a week, dozens or hundreds of
opportunities flashed in their face to engage in Internet gambling.
They are flooded with credit cards that if they use them will extend
their credit far beyond their capacity to pay, perhaps for the next 40,
50 years or so.
There has been a growing tendency too of obtaining student loans to
pay off credit card debt, credit card debt that has often been incurred
during the course of Internet gambling. There is a difficulty. Student
loans cannot be discharged in bankruptcy. So the lives of these
students are at stake, and we can do something about it. We can follow
the recommendation of the national commission. We can follow the
recommendations of the various religious organizations across America,
the various athletic associations across America. We can follow the
recommendations of the police organizations across America. We can
follow the recommendations and vote ``yes,'' or we could ignore them
and flaunt them and vote ``no.''
Mr. Speaker, I yield back the balance of my time.
Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
Let me just conclude by thanking, if I can, the gentleman from New
York (Mr. LaFalce) and all of the others who have led this charge. I
will just conclude with one observation. Gambling alone leads too
easily to addiction. It leads to a situation where fathers lose their
homes, mothers their families, students access to college and, in far
too many instances, violence to the person and to their friends. This
is a family issue. It is a national issue. We must act. I urge its
adoption.
Mr. BACA. Mr. Speaker, I oppose H.R. 556, the Unlawful Internet
Gambling Funding Prohibition Act. Although this bill is entitled a
``prohibition'' act, it is really an authorization act. Section 3 of
the bill provides a carve-out for transactions with businesses licensed
or authorized by States. It provides exemptions that, in essence, would
allow States to license new Internet gaming operations for lotteries,
horse tracks, and corporate gambling operations. The House Judiciary
Committee rejected a similar provision in July when it adopted an
amendment to delete all authorizations for interstate Internet gaming.
Although the bill grants States these exemptions, it does not provide
Tribal governments with the same exemptions. I would not be standing
here today, in opposition to this bill, if there were a flat
prohibition on internet gaming. But that is not what this bill does.
The bill gives an advantage to private gaming enterprises. It does
not treat tribal governments as equals. Just when we think that the
centuries of mistreatment and discrimination are ending, something
comes up to show us that they haven't. We are learning that the more
things change, the more they stay the same.
Once again, Congress is trying put tribal governments at a
disadvantage. And once against, I will stand up and defend the
sovereignty of tribal governments! I will stand up and make sure that
our government lives up to its trust responsibility!
Gaming provides the financial resources that tribes need to survive
and to bring economic development to their people. It provides the
resources that tribal governments need to provide health, education and
hope to their people. It is the lifeblood of our Native American
brothers and sisters! I will not stand by and watch as Congress puts
tribes behind the eight-ball.
I urge my colleagues to vote ``no'' on H.R. 556.
Mr. PAUL. Mr. Speaker, H.R. 556 limits the ability of individual
citizens to use bank instruments, including credit cards or checks, to
finance Internet gambling. This legislation should be rejected by
Congress since the federal government has no constitutional authority
to ban or even discourage any form of gambling.
In addition to being unconstitutional, H.R. 556 is likely to prove
ineffective at ending Internet gambling. Instead, this bill will ensure
that gambling is controlled by organized crime. History, from the
failed experiment of prohibition to today's futile ``war on drugs,''
shows that the government cannot eliminate demand for something like
Internet gambling simply by passing a law. Instead, H.R. 556 will force
those who wish to gamble over the Internet to patronize suppliers
willing to flaunt the ban. In many cases, providers of services banned
by the government will be members of criminal organizations. Even if
organized crime does not operate Internet gambling enterprises their
competitors are likely to be controlled by organized crime. After all,
since the owners and patrons of Internet gambling cannot rely on the
police and courts to enforce contracts and resolve other disputes, they
will be forced to rely on members of organized crime to perform those
functions. Thus, the profits of Internet gambling will flow into
organized crime. Furthermore, outlawing an activity will raise the
price vendors are able to charge consumers, thus increasing the profits
flowing to organized crime from Internet gambling. It is bitterly
ironic that a bill masquerading as an attack on crime will actually
increase organized crime's ability to control and profit from Internet
gambling.
In conclusion, Mr. Speaker, H.R. 556 violates the constitutional
limits on federal power. Furthermore, laws such as H.R. 556 are
ineffective in eliminating the demand for vices such as Internet
gambling; instead, they ensure that these enterprises will be
controlled by organized crime. Therefore I urge my colleagues to reject
H.R. 556, the Internet Gambling Prohibition Act.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Gilchrest). The question is on the
motion offered by the gentleman from Iowa (Mr. Leach) that the House
suspend the rules and pass the bill, H.R. 556, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________