[Congressional Record Volume 149, Number 41 (Thursday, March 13, 2003)]
[Senate]
[Pages S3745-S3747]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KYL (for himself, Mr. Shelby, and Mrs. Feinstein):
  S. 627. A bill to prevent the use of certain payments instruments, 
credit cards, and fund transfers for unlawful Internet gambling, and 
for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. KYL. Mr. President, I ask unanimous consent that the text of the 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 627

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Unlawful Internet Gambling 
     Funding Prohibition Act''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) Internet gambling is primarily funded through personal 
     use of payment system instruments, credit cards, and wire 
     transfers;
       (2) the National Gambling Impact Study Commission in 1999 
     recommended the passage of legislation to prohibit wire 
     transfers to Internet gambling sites or the banks which 
     represent them;
       (3) Internet gambling is a growing cause of debt collection 
     problems for insured depository institutions and the consumer 
     credit industry;
       (4) Internet gambling conducted through offshore 
     jurisdictions has been identified by United States law 
     enforcement officials as a significant money laundering 
     vulnerability;
       (5) gambling through the Internet, which has grown rapidly 
     in the half-decade preceding the enactment of this Act, opens 
     up the possibility of immediate, individual, 24-hour access 
     in every home to the full range of wagering opportunities on 
     sporting events or casino-like contests, such as roulette, 
     slot machines, poker, or black-jack; and
       (6) the extent to which gambling is permitted and regulated 
     in the United States has been primarily a matter for 
     determination by individual States and, if applicable, Indian 
     tribes, with Federal law serving to prevent interstate or 
     other attempts to evade or avoid such determinations.

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

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

         ``SUBCHAPTER IV--FUNDING OF ILLEGAL INTERNET GAMBLING

     ``Sec. 5361. Definitions

       ``For purposes of this subchapter, the following 
     definitions shall apply:
       ``(1) Bet or wager.--The term `bet or wager'--
       ``(A) means the staking or risking by any person of 
     something of value upon the outcome of a contest of others, a 
     sporting event, or a game subject to chance, upon an 
     agreement or understanding that the person or another person 
     will receive something of value in the event of a certain 
     outcome;
       ``(B) includes the purchase of a chance or opportunity to 
     win a lottery or other prize (which opportunity to win is 
     predominantly subject to chance);
       ``(C) includes any scheme of a type described in section 
     3702 of title 28, United States Code;
       ``(D) includes any instructions or information pertaining 
     to the establishment or movement of funds in, to, or from an 
     account by the bettor or customer with regard to the business 
     of betting or wagering; and
       ``(E) does not include--
       ``(i) any activity governed by the securities laws (as that 
     term is defined in section 3(a)(47) of the Securities 
     Exchange Act of 1934) for the purchase or sale of securities 
     (as that term is defined in section 3(a)(10) of such Act);
       ``(ii) any transaction conducted on or subject to the rules 
     of a registered entity or exempt board of trade pursuant to 
     the Commodity Exchange Act;
       ``(iii) any over-the-counter derivative instrument;
       ``(iv) any other transaction that--

       ``(I) is excluded or exempt from regulation under the 
     Commodity Exchange Act; or
       ``(II) is exempt from State gaming or bucket shop laws 
     under section 12(e) of the Commodity Exchange Act or section 
     28(a) of the Securities Exchange Act of 1934;

       ``(v) any contract of indemnity or guarantee;
       ``(vi) any contract for insurance;
       ``(vii) any deposit or other transaction with an insured 
     institution;
       ``(viii) any participation in a simulation sports game, or 
     an educational game or contest, that--

       ``(I) is not dependent solely on the outcome of any single 
     sporting event or nonparticipant's singular individual 
     performance in any single sporting event;
       ``(II) has an outcome that reflects the relative knowledge 
     and skill of the participants, with such outcome determined 
     predominantly by accumulated statistical results of sporting 
     events; and
       ``(III) offers a prize or award to a participant that is 
     established in advance of the game or contest and is not 
     determined by the number of participants or the amount of any 
     fees paid by those participants; or

       ``(ix) any lawful transaction with a business licensed or 
     authorized by a State.
       ``(2) Business of betting or wagering.--The term `business 
     of betting or wagering' does not include, other than for 
     purposes of section 5366, any creditor, credit card issuer, 
     insured institution, or other financial institution, operator 
     of a terminal at which an electronic fund transfer may be 
     initiated, money transmitting business, or international, 
     national, regional, or local network utilized to effect a 
     credit transaction, electronic fund transfer, stored value 
     product transaction, or money transmitting service, or any 
     participant in such network, or any interactive computer 
     service or telecommunications service.
       ``(3) Designated payment system.--The term `designated 
     payment system' means any system utilized by any creditor, 
     credit card issuer, financial institution, operator of a 
     terminal at which an electronic fund transfer may be 
     initiated, money transmitting business, or international, 
     national, regional, or local network utilized to effect a 
     credit transaction, electronic fund transfer, stored value 
     product transaction, or money transmitting service, or any 
     participant in such network, that the Secretary, in 
     consultation with the Board of Governors of the Federal 
     Reserve System and the Attorney General of the United States, 
     determines, by regulation or order, could be utilized in 
     connection with, or to facilitate, any restricted 
     transaction.
       ``(4) Internet.--The term `Internet' means the 
     international computer network of interoperable packet 
     switched data networks.
       ``(5) Interactive computer service.--The term `interactive 
     computer service' has the same meaning as in section 230(f) 
     of the Communications Act of 1934.
       ``(6) Office.--The term `Office' means the Office of 
     Electronic Funding Oversight, established under section 5362.

[[Page S3746]]

       ``(7) Restricted transaction.--The term `restricted 
     transaction' means any transaction or transmittal involving 
     any credit, funds, instrument, or proceeds described in any 
     paragraph of section 5363 which the recipient is prohibited 
     from accepting under section 5363.
       ``(8) Secretary.--The term `Secretary' means the Secretary 
     of the Treasury.
       ``(9) Unlawful internet gambling.--The term `unlawful 
     Internet gambling' means the placing, receipt, or other 
     transmission of a bet or wager by any means which involves 
     the use, at least in part, of the Internet, where such bet or 
     wager is unlawful under any applicable Federal or State law 
     in the State in which the bet or wager is initiated, 
     received, or otherwise made.
       ``(10) Other terms.--
       ``(A) Credit; creditor; credit card; and card issuer.--The 
     terms `credit', `creditor', `credit card', and `card issuer' 
     have the same meanings as in section 103 of the Truth in 
     Lending Act.
       ``(B) Electronic fund transfer.--The term `electronic fund 
     transfer'--
       ``(i) has the same meaning as in section 903 of the 
     Electronic Fund Transfer Act, except that such term includes 
     transfers that would otherwise be excluded under section 
     903(6)(E) of that Act; and
       ``(ii) includes any fund transfer covered by Article 4A of 
     the Uniform Commercial Code, as in effect in any State.
       ``(C) Financial institution.--The term `financial 
     institution' has the same meaning as in section 903 of the 
     Electronic Fund Transfer Act, except that such term does not 
     include a casino, sports book, or other business at or 
     through which bets or wagers may be placed or received.
       ``(D) Insured institution.--The term `insured institution' 
     means--
       ``(i) an insured depository institution, as defined in 
     section 3 of the Federal Deposit Insurance Act; and
       ``(ii) an insured credit union, as defined in section 101 
     of the Federal Credit Union Act.
       ``(E) Money transmitting business and money transmitting 
     service.--The terms `money transmitting business' and `money 
     transmitting service' have the same meanings as in section 
     5330(d) (determined without regard to any regulations issued 
     by the Secretary thereunder).

     ``Sec. 5362. Office of electronic funding oversight; policies 
       and procedures to identify and prevent restricted 
       transactions

       ``(a) Establishment of Treasury Office.--
       ``(1) In general.--There is established within the 
     Department of the Treasury, the Office of Electronic Funding 
     Oversight, the purposes of which are--
       ``(A) to coordinate Federal efforts to prohibit restricted 
     transactions; and
       ``(B) otherwise to carry out the duties of the Office, as 
     specified in this subchapter.
       ``(2) Director.--The Office shall be headed by a Director, 
     appointed by the Secretary. The director of the Office may 
     serve as the designee of the Secretary, at the request of the 
     Secretary, for any purpose under this subchapter.
       ``(b) Regulations.--Not later than 6 months after the date 
     of enactment of this subchapter, the Office, in consultation 
     with the Board of Governors of the Federal Reserve System and 
     the Attorney General of the United States, shall prescribe 
     regulations requiring any designated payment system, and all 
     participants therein, to establish policies and procedures 
     reasonably designed to identify and prevent restricted 
     transactions through the establishment of policies and 
     procedures that--
       ``(1) allow the payment system and any person involved in 
     the payment system to identify restricted transactions by 
     means of codes in authorization messages or by other means;
       ``(2) block restricted transactions identified as a result 
     of the policies and procedures developed pursuant to 
     paragraph (1); and
       ``(3) prevent the acceptance of the products or services of 
     the payment system in connection with a restricted 
     transaction.
       ``(c) Requirements for Policies and Procedures.--In 
     prescribing regulations pursuant to subsection (b), the 
     Office shall--
       ``(1) identify types of policies and procedures, including 
     nonexclusive examples, which would be deemed to be 
     `reasonably designed to identify' and `reasonably designed to 
     block' or to `prevent the acceptance of the products or 
     services' with respect to each type of transaction, such as, 
     should credit card transactions be so designated, identifying 
     transactions by a code or codes in the authorization message 
     and denying authorization of a credit card transaction in 
     response to an authorization message;
       ``(2) to the extent practical, permit any participant in a 
     payment system to choose among alternative means of 
     identifying and blocking, or otherwise preventing the 
     acceptance of the products or services of the payment system 
     or participant in connection with, restricted transactions; 
     and
       ``(3) consider exempting restricted transactions from any 
     requirement imposed under such regulations, if the Office 
     finds that it is not reasonably practical to identify and 
     block, or otherwise prevent, such transactions.
       ``(d) Compliance With Payment System Policies and 
     Procedures.--A creditor, credit card issuer, financial 
     institution, operator of a terminal at which an electronic 
     fund transfer may be initiated, money transmitting business, 
     or international, national, regional, or local network 
     utilized to effect a credit transaction, electronic fund 
     transfer, stored value product transaction, or money 
     transmitting service, or a participant in such network, shall 
     be considered to be in compliance with the regulations 
     prescribed under subsection (b), if--
       ``(1) such person relies on and complies with the policies 
     and procedures of a designated payment system of which it is 
     a member or participant--
       ``(A) to identify and block restricted transactions; or
       ``(B) to otherwise prevent the acceptance of the products 
     or services of the payment system, member, or participant in 
     connection with restricted transactions; and
       ``(2) such policies and procedures of the designated 
     payment system comply with the requirements of regulations 
     prescribed under subsection (b).
       ``(e) No Liability for Blocking or Refusing To Honor 
     Restricted Transactions.--A person that is subject to a 
     regulation prescribed or order issued under this subchapter 
     and blocks, or otherwise refuses to honor, a restricted 
     transaction, or as a member of a designated payment system 
     relies on the policies and procedures of the payment system, 
     in an effort to comply with regulations prescribed under this 
     section, shall not be liable to any party for such action.
       ``(f) Regulatory Enforcement.--Regulations issued by the 
     Office under this subchapter shall be enforced by the Federal 
     functional regulators and the Federal Trade Commission, in 
     the manner provided in section 505(a) of the Gramm-Leach-
     Bliley Act.

     ``Sec. 5363. Prohibition on acceptance of any bank instrument 
       for unlawful internet gambling

       ``No person engaged in the business of betting or wagering 
     may knowingly accept, in connection with the participation of 
     another person in unlawful Internet gambling--
       ``(1) credit, or the proceeds of credit, extended to or on 
     behalf of such other person (including credit extended 
     through the use of a credit card);
       ``(2) an electronic fund transfer or funds transmitted by 
     or through a money transmitting business, or the proceeds of 
     an electronic fund transfer or money transmitting service, 
     from or on behalf of such other person;
       ``(3) any check, draft, or similar instrument which is 
     drawn by or on behalf of such other person and is drawn on or 
     payable at or through any financial institution; or
       ``(4) the proceeds of any other form of financial 
     transaction, as the Secretary may prescribe by regulation, 
     which involves a financial institution as a payor or 
     financial intermediary on behalf of or for the benefit of 
     such other person.

     ``Sec. 5364. Civil remedies

       ``(a) Jurisdiction.--The district courts of the United 
     States shall have original and exclusive jurisdiction to 
     prevent and restrain violations of this subchapter or the 
     rules or regulations issued under this subchapter by issuing 
     appropriate orders in accordance with this section, 
     regardless of whether a prosecution has been initiated under 
     this subchapter.
       ``(b) Proceedings.--
       ``(1) Institution by federal government.--
       ``(A) In general.--The United States, acting through the 
     Attorney General, or, in the case of rules or regulations 
     issued under this subchapter, through an agency authorized to 
     enforce such regulations in accordance with this subchapter, 
     may institute proceedings under this section to prevent or 
     restrain a violation or a threatened violation of this 
     subchapter or such rules or regulations.
       ``(B) Relief.--Upon application of the United States under 
     this paragraph, the district court may enter a preliminary 
     injunction or an injunction against any person to prevent or 
     restrain a violation or threatened violation of this 
     subchapter or the rules or regulations issued under this 
     subchapter, in accordance with rule 65 of the Federal Rules 
     of Civil Procedure.
       ``(2) Institution by state attorney general.--
       ``(A) In general.--The attorney general of a State (or 
     other appropriate State official) in which a violation of 
     this subchapter allegedly has occurred or will occur may 
     institute proceedings under this section to prevent or 
     restrain the violation or threatened violation.
       ``(B) Relief.--Upon application of the attorney general (or 
     other appropriate State official) of an affected State under 
     this paragraph, the district court may enter a preliminary 
     injunction or an injunction against any person to prevent or 
     restrain a violation or threatened violation of this 
     subchapter, in accordance with rule 65 of the Federal Rules 
     of Civil Procedure.
       ``(3) Indian lands.--
       ``(A) In general.--Notwithstanding paragraphs (1) and (2), 
     for a violation of this subchapter or the rules or 
     regulations issued under this subchapter that is alleged to 
     have occurred, or may occur, on Indian lands (as that term is 
     defined in section 4 of the Indian Gaming Regulatory Act)--
       ``(i) the United States shall have the enforcement 
     authority provided under paragraph (1); and
       ``(ii) the enforcement authorities specified in an 
     applicable Tribal-State compact negotiated under section 11 
     of the Indian Gaming Regulatory Act shall be carried out in 
     accordance with that compact.
       ``(B) Rule of construction.--No provision of this 
     subchapter shall be construed as altering, superseding, or 
     otherwise affecting

[[Page S3747]]

     the application of the Indian Gaming Regulatory Act.
       ``(c) Expedited Proceedings.--In addition to any proceeding 
     under subsection (b), a district court may, in exigent 
     circumstances, enter a temporary restraining order against a 
     person alleged to be in violation of this subchapter or the 
     rules or regulations issued under this subchapter, upon 
     application of the United States under subsection (b)(1), or 
     the attorney general (or other appropriate State official) of 
     an affected State under subsection (b)(2), in accordance with 
     rule 65(b) of the Federal Rules of Civil Procedure.
       ``(d) Limitation Relating to Interactive Computer 
     Services.--
       ``(1) In general.--Relief granted under this section 
     against an interactive computer service shall--
       ``(A) be limited to the removal of, or disabling of access 
     to, an online site violating this subchapter, or a hypertext 
     link to an online site violating this subchapter, that 
     resides on a computer server that such service controls or 
     operates, except that the limitation in this subparagraph 
     shall not apply if the service is subject to liability under 
     this section pursuant to section 5366;
       ``(B) be available only after notice to the interactive 
     computer service and an opportunity for the service to appear 
     are provided;
       ``(C) not impose any obligation on an interactive computer 
     service to monitor its service or to affirmatively seek facts 
     indicating activity violating this subchapter;
       ``(D) specify the interactive computer service to which it 
     applies; and
       ``(E) specifically identify the location of the online site 
     or hypertext link to be removed or access to which is to be 
     disabled.
       ``(2) Coordination with other law.--An interactive computer 
     service that does not violate this subchapter shall not be 
     liable under section 1084 of title 18, United States Code, 
     except that the limitation in this paragraph shall not apply 
     if an interactive computer service has actual knowledge and 
     control of bets and wagers and--
       ``(A) operates, manages, supervises, or directs an Internet 
     website at which unlawful bets or wagers may be placed, 
     received, or otherwise made or at which unlawful bets or 
     wagers are offered to be placed, received, or otherwise made; 
     or
       ``(B) owns or controls, or is owned or controlled by, any 
     person who operates, manages, supervises, or directs an 
     Internet website at which unlawful bets or wagers may be 
     placed, received, or otherwise made, or at which unlawful 
     bets or wagers are offered to be placed, received, or 
     otherwise made.
       ``(3) Rule of construction.--The provisions of paragraph 
     (2) do not affect any potential liability of an interactive 
     computer service or other person under any provision of title 
     18, United States Code, other than as specifically provided 
     in paragraph (2).
       ``(e) Factors To Be Considered in Certain Cases.--In 
     considering granting relief under this section against any 
     payment system, or any participant in a payment system that 
     is a creditor, credit card issuer, financial institution, 
     operator of a terminal at which an electronic fund transfer 
     may be initiated, money transmitting business, or 
     international, national, regional, or local network utilized 
     to effect a credit transaction, electronic fund transfer, 
     stored value product transaction, or money transmitting 
     service, or a participant in such network, the court shall 
     consider--
       ``(1) the extent to which the person extending credit or 
     transmitting funds knew or should have known that the 
     transaction was in connection with unlawful Internet 
     gambling;
       ``(2) the history of such person in extending credit or 
     transmitting funds when such person knew or should have known 
     that the transaction is in connection with unlawful Internet 
     gambling;
       ``(3) the extent to which such person has established and 
     is maintaining policies and procedures in compliance with 
     rules and regulations issued under this subchapter;
       ``(4) the extent to which it is feasible for any specific 
     remedy prescribed as part of such relief to be implemented by 
     such person without substantial deviation from normal 
     business practice; and
       ``(5) the costs and burdens that the specific remedy will 
     have on such person.
       ``(f) Notice to Regulators and Financial Institutions.--
     Before initiating any proceeding under subsection (b) with 
     respect to a violation or potential violation of this 
     subchapter or the rules or regulations issued under this 
     subchapter by any creditor, credit card issuer, financial 
     institution, operator of a terminal at which an electronic 
     fund transfer may be initiated, money transmitting business, 
     or international, national, regional, or local network 
     utilized to effect a credit transaction, electronic fund 
     transfer, stored value product transaction, or money 
     transmitting service, or any participant in such network, the 
     Attorney General of the United States, an attorney general of 
     a State (or other appropriate State official), or an agency 
     authorized to initiate such proceeding under this subchapter, 
     shall--
       ``(1) notify such person, and the appropriate regulatory 
     agency (as determined in accordance with section 5362(f) for 
     such person) of such violation or potential violation and the 
     remedy to be sought in such proceeding; and
       ``(2) allow such person 30 days to implement a reasonable 
     remedy for the violation or potential violation, consistent 
     with the factors described in subsection (e), and in 
     conjunction with such action as the appropriate regulatory 
     agency may take.

     ``Sec. 5365. Criminal penalties

       ``(a) In General.--Whoever violates this subchapter or the 
     rules or regulations issued under this subchapter shall be 
     fined under title 18, United States Code, or imprisoned for 
     not more than 5 years, or both.
       ``(b) Permanent Injunction.--Upon conviction of a person 
     under this section, the court may enter a permanent 
     injunction enjoining such person from placing, receiving, or 
     otherwise making bets or wagers or sending, receiving, or 
     inviting information assisting in the placing of bets or 
     wagers.

     ``Sec. 5366. Circumventions prohibited

       ``Notwithstanding section 5361(2), a creditor, credit card 
     issuer, financial institution, operator of a terminal at 
     which an electronic fund transfer may be initiated, money 
     transmitting business, or international, national, regional, 
     or local network utilized to effect a credit transaction, 
     electronic fund transfer, stored value product transaction, 
     or money transmitting service, or any participant in such 
     network, or any interactive computer service or 
     telecommunications service, may be liable under this 
     subchapter if such creditor, issuer, institution, operator, 
     business, network, or participant has actual knowledge and 
     control of bets and wagers, and--
       ``(1) operates, manages, supervises, or directs an Internet 
     website at which unlawful bets or wagers may be placed, 
     received, or otherwise made, or at which unlawful bets or 
     wagers are offered to be placed, received, or otherwise made; 
     or
       ``(2) owns or controls, or is owned or controlled by, any 
     person who operates, manages, supervises, or directs an 
     Internet website at which unlawful bets or wagers may be 
     placed, received, or otherwise made, or at which unlawful 
     bets or wagers are offered to be placed, received, or 
     otherwise made.''.

     SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN 
                   JURISDICTIONS.

       (a) In General.--In deliberations between the United States 
     Government and any other country on money laundering, 
     corruption, and crime issues, the United States Government 
     should--
       (1) encourage cooperation by foreign governments and 
     relevant international fora in identifying whether Internet 
     gambling operations are being used for money laundering, 
     corruption, or other crimes;
       (2) advance policies that promote the cooperation of 
     foreign governments, through information sharing or other 
     measures, in the enforcement of this Act and the amendments 
     made by this Act; and
       (3) encourage the Financial Action Task Force on Money 
     Laundering, in its annual report on money laundering 
     typologies, to study the extent to which Internet gambling 
     operations are being used for money laundering purposes.
       (b) Report Required.--The Secretary of the Treasury shall 
     submit an annual report to Congress on any deliberations 
     between the United States and other countries on issues 
     relating to Internet gambling.

     SEC. 5. AMENDMENTS TO CRIMINAL GAMBLING PROVISIONS.

       (a) Amendment to Definition.--Section 1081 of title 18, 
     United States Code, is amended--
       (1) by designating the five undesignated paragraphs that 
     begin with ``The term'' as paragraphs (1) through (5), 
     respectively; and
       (2) in paragraph (5), as so designated--
       (A) by striking ``wire communication'' and inserting 
     ``communication'';
       (B) by inserting ``satellite, microwave,'' after 
     ``cable,''; and
       (C) by inserting ``(whether fixed or mobile)'' after 
     ``connection''.
       (b) Increase in Penalty for Unlawful Wire Transfers of 
     Wagering Information.--Section 1084(a) of title 18, United 
     States Code, is amended by striking ``two years'' and 
     inserting ``5 years''.
                                 ______