[House Report 108-133]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-133
======================================================================
UNLAWFUL INTERNET GAMBLING FUNDING PROHIBITION ACT
_______
June 2, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 2143]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 2143) to prevent the use of certain bank instruments
for unlawful Internet gambling, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 4
Background and Need for Legislation.............................. 4
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 7
Committee Oversight Findings..................................... 8
Performance Goals and Objectives................................. 8
New Budget Authority, Entitlement Authority, and Tax Expenditures 8
Committee Cost Estimate.......................................... 8
Congressional Budget Office Cost Estimate........................ 8
Federal Mandates Statement....................................... 10
Advisory Committee Statement..................................... 10
Constitutional Authority Statement............................... 10
Applicability to Legislative Branch.............................. 11
Section-by-Section Analysis...................................... 11
Changes to Existing Law Made by the Bill, as Reported............ 12
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Unlawful Internet Gambling Funding
Prohibition Act''.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) Internet gambling is primarily funded through personal
use of bank instruments, including credit cards and wire
transfers.
(2) The National Gambling Impact Study Commission in 1999
recommended the passage of legislation to prohibit wire
transfers to Internet gambling sites or the banks which
represent them.
(3) Internet gambling is a major cause of debt collection
problems for insured depository institutions and the consumer
credit industry.
(4) Internet gambling conducted through offshore
jurisdictions has been identified by United States law
enforcement officials as a significant money laundering
vulnerability.
SEC. 3. POLICIES AND PROCEDURES REQUIRED TO PREVENT PAYMENTS FOR
UNLAWFUL INTERNET GAMBLING.
(a) Regulations.--Before the end of the 6-month period beginning on
the date of the enactment of this Act, the Federal functional
regulators shall prescribe regulations requiring any designated payment
system to establish policies and procedures reasonably designed to
identify and prevent restricted transactions in any of the following
ways:
(1) The establishment of policies and procedures that--
(A) allow the payment system and any person involved
in the payment system to identify restricted
transactions by means of codes in authorization
messages or by other means; and
(B) block restricted transactions identified as a
result of the policies and procedures developed
pursuant to subparagraph (A).
(2) The establishment of policies and procedures that prevent
the acceptance of the products or services of the payment
system in connection with a restricted transaction.
(b) Requirements For Policies and Procedures.--In prescribing
regulations pursuant to subsection (a), the Federal functional
regulators shall--
(1) identify types of policies and procedures, including
nonexclusive examples, which would be deemed to be ``reasonably
designed to identify'' and ``reasonably designed to block'' or
to ``prevent the acceptance of the products or services'' with
respect to each type of transaction, such as, should credit
card transactions be so designated, identifying transactions by
a code or codes in the authorization message and denying
authorization of a credit card transaction in response to an
authorization message;
(2) to the extent practical, permit any participant in a
payment system to choose among alternative means of identifying
and blocking, or otherwise preventing the acceptance of the
products or services of the payment system or participant in
connection with, restricted transactions; and
(3) consider exempting restricted transactions from any
requirement under subsection (a) if the Federal functional
regulators find that it is not reasonably practical to identify
and block, or otherwise prevent, such transactions.
(c) Compliance With Payment System Policies and Procedures.--A
creditor, credit card issuer, financial institution, operator of a
terminal at which an electronic fund transfer may be initiated, money
transmitting business, or international, national, regional, or local
network utilized to effect a credit transaction, electronic fund
transfer, or money transmitting service, or a participant in such
network, meets the requirement of subsection (a) if--
(1) such person relies on and complies with the policies and
procedures of a designated payment system of which it is a
member or participant to--
(A) identify and block restricted transactions; or
(B) otherwise prevent the acceptance of the products
or services of the payment system, member, or
participant in connection with restricted transactions;
and
(2) such policies and procedures of the designated payment
system comply with the requirements of regulations prescribed
under subsection (a).
(d) Enforcement.--
(1) In general.--This section shall be enforced by the
Federal functional regulators and the Federal Trade Commission
under applicable law in the manner provided in section 505(a)
of the Gramm-Leach-Bliley Act.
(2) Factors to be considered.--In considering any enforcement
action under this subsection against any payment system, or any
participant in a payment system that is a creditor, credit card
issuer, financial institution, operator of a terminal at which
an electronic fund transfer may be initiated, money
transmitting business, or international, national, regional, or
local network utilized to effect a credit transaction,
electronic fund transfer, or money transmitting service, or a
participant in such network, the Federal functional regulators
and the Federal Trade Commission shall consider the following
factors:
(A) The extent to which such person is extending
credit or transmitting funds knowing the transaction is
in connection with unlawful Internet gambling.
(B) The history of such person in extending credit or
transmitting funds knowing the transaction is in
connection with unlawful Internet gambling.
(C) The extent to which such person has established
and is maintaining policies and procedures in
compliance with regulations prescribed under this
subsection.
(D) The feasibility that any specific remedy
prescribed can be implemented by such person without
substantial deviation from normal business practice.
(E) The costs and burdens the specific remedy will
have on such person.
SEC. 4. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Restricted transaction.--The term ``restricted
transaction'' means any transaction or transmittal to any
person engaged in the business of betting or wagering, in
connection with the participation of another person in unlawful
Internet gambling, of--
(A) credit, or the proceeds of credit, extended to or
on behalf of such other person (including credit
extended through the use of a credit card);
(B) an electronic fund transfer or funds transmitted
by or through a money transmitting business, or the
proceeds of an electronic fund transfer or money
transmitting service, from or on behalf of the other
person;
(C) any check, draft, or similar instrument which is
drawn by or on behalf of the other person and is drawn
on or payable at or through any financial institution;
or
(D) the proceeds of any other form of financial
transaction as the Federal functional regulators may
prescribe by regulation which involves a financial
institution as a payor or financial intermediary on
behalf of or for the benefit of the other person.
(2) Bets or wagers.--The term ``bets or wagers''--
(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game subject to chance,
upon an agreement or understanding that the person or
another person will receive something of greater value
than the amount staked or risked in the event of a
certain outcome;
(B) includes the purchase of a chance or opportunity
to win a lottery or other prize (which opportunity to
win is predominantly subject to chance);
(C) includes any scheme of a type described in
section 3702 of title 28, United States Code;
(D) includes any instructions or information
pertaining to the establishment or movement of funds in
an account by the bettor or customer with the business
of betting or wagering; and
(E) does not include--
(i) any activity governed by the securities
laws (as that term is defined in section
3(a)(47) of the Securities Exchange Act of
1934) for the purchase or sale of securities
(as that term is defined in section 3(a)(10) of
such Act);
(ii) any transaction conducted on or subject
to the rules of a registered entity or exempt
board of trade pursuant to the Commodity
Exchange Act;
(iii) any over-the-counter derivative
instrument;
(iv) any other transaction that--
(I) is excluded or exempt from
regulation under the Commodity Exchange
Act; or
(II) is exempt from State gaming or
bucket shop laws under section 12(e) of
the Commodity Exchange Act or section
28(a) of the Securities Exchange Act of
1934;
(v) any contract of indemnity or guarantee;
(vi) any contract for insurance;
(vii) any deposit or other transaction with a
depository institution (as defined in section
3(c) of the Federal Deposit Insurance Act);
(viii) any participation in a simulation
sports game or an educational game or contest
that--
(I) is not dependent solely on the
outcome of any single sporting event or
nonparticipant's singular individual
performance in any single sporting
event;
(II) has an outcome that reflects the
relative knowledge and skill of the
participants with such outcome
determined predominantly by accumulated
statistical results of sporting events;
and
(III) offers a prize or award to a
participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants; and
(ix) any lawful transaction with a business
licensed or authorized by a State.
(3) Designated payment system defined.--The term ``designated
payment system'' means any system utilized by any creditor,
credit card issuer, financial institution, operator of a
terminal at which an electronic fund transfer may be initiated,
money transmitting business, or international, national,
regional, or local network utilized to effect a credit
transaction, electronic fund transfer, or money transmitting
service, or any participant in such network, that the Federal
functional regulators determine, by regulation or order, could
be utilized in connection with, or to facilitate, any
restricted transaction.
(4) Federal functional regulator.--The term ``Federal
functional regulator'' has the same meaning as in section
509(2) of the Gramm-Leach-Bliley Act.
(5) Internet.--The term ``Internet'' means the international
computer network of interoperable packet switched data
networks.
(6) Unlawful internet gambling.--The term ``unlawful Internet
gambling'' means to place, receive, or otherwise transmit a bet
or wager by any means which involves the use, at least in part,
of the Internet where such bet or wager is unlawful under any
applicable Federal or State law in the State in which the bet
or wager is initiated, received, or otherwise made.
(7) Other terms.--
(A) Credit; creditor; and credit card.--The terms
``credit'', ``creditor'', and ``credit card'' have the
meanings given such terms in section 103 of the Truth
in Lending Act.
(B) Electronic fund transfer.--The term ``electronic
fund transfer''--
(i) has the meaning given such term in
section 903 of the Electronic Fund Transfer
Act; and
(ii) includes any fund transfer covered by
Article 4A of the Uniform Commercial Code, as
in effect in any State.
(C) Financial institution.--The term ``financial
institution''--
(i) has the meaning given such term in
section 903 of the Electronic Fund Transfer
Act; and
(ii) includes any financial institution, as
defined in section 509(3) of the Gramm-Leach-
Bliley Act.
(D) Money transmitting business and money
transmitting service.--The terms ``money transmitting
business'' and ``money transmitting service'' have the
meanings given such terms in section 5330(d) of title
31, United States Code.
Purpose and Summary
H.R. 2143, the Unlawful Internet Gambling Funding
Prohibition Act, directs the Federal functional regulators to
prescribe regulations limiting the acceptance of any bank
instrument for unlawful Internet gambling. It defines certain
terms for purposes of the Act and establishes regulatory
enforcement authorities. Its primary purpose is to give the
Federal functional regulators a new, more effective tool for
combating offshore Internet gambling sites that illegally
extend their services to U.S. residents via the Internet.
Background and Need for Legislation
The Committee has established a comprehensive hearing and
markup record on Internet gambling, most particularly in the
107th Congress. In addition to the extensive debate at the
Committee's October 11, 2001 markup of H.R. 3004, the Financial
Anti-Terrorism Act of 2001, Internet gambling was addressed at
the Committee's October 3, 2001 hearing on terrorism and money
laundering. At that hearing, the Federal Bureau of
Investigation (FBI), the Department of Justice, and a money
laundering expert testified that Internet gambling serves as a
vehicle for money laundering and can be exploited by terrorists
for that purpose. The FBI also testified about pending
litigation linking organized crime to money laundering and
Internet gambling.
At two hearings held in July 2001 by the Subcommittee on
Oversight and Investigations and the Subcommittee on Financial
Institutions and Consumer Credit, witnesses discussed the legal
status of Internet gambling, the social and financial
challenges it poses, and legislative options for addressing
those challenges.
Conventional forms of gambling activities, such as casino
wagering, State lotteries, slot machines and horseracing, legal
in many jurisdictions, are regulated by the individual States.
However, these activities are subject to intense scrutiny and a
myriad of licensing and other operational requirements.
Virtually all States prohibit the operation of gambling
businesses not expressly permitted by their respective
constitutions or special legislation. Internet gambling
currently constitutes illegal gambling activity in all 50
States. Although in June of 2001 the Nevada legislature
authorized the Nevada Gaming Commission to legalize on-line,
Internet gambling operations if and when such operations can be
conducted in compliance with Federal law, the Gaming Commission
believes that such compliance cannot be ensured at present.
Because Internet gambling is generally held to be illegal
under Federal and State law, most of the estimated 2,000
Internet gambling sites today operate from offshore locations
in the Caribbean and elsewhere. As such, they operate
effectively beyond the reach of U.S. regulators and law
enforcement, as well as the statutory anti-money laundering
regimes that apply to U.S.-based casinos. These ``virtual
casinos'' advertise the ease of opening betting accounts mainly
through the use of credit cards and alternative payment
systems. Internet gambling sites are not only vulnerable to
criminal exploitation by money launderers; they also can easily
abuse a customer's credit card information or manipulate the
odds of a particular wager to the casino's advantage.
At the Oversight Subcommittee's hearing on July 12, 2001,
the American Gaming Association--representing commercial
casinos and their supporters in the United States--addressed
some of the practical problems associated with Internet
gambling, including the difficulty of subjecting Internet
operations to the kinds of regulation currently applied to
U.S.-based casinos. According to the AGA, its major concern is
that offshore Internet gambling sites ``frustrate important
State policies, including restrictions on the availability of
gaming within each State.'' The AGA went on to say: ``* * *
unregulated Internet gambling that exists today allows an
unlicensed, untaxed, unsupervised operator to engage in
wagering that is otherwise subject to stringent Federal and
State regulatory controls. These controls are vital to
preserving the honesty, integrity and fairness that those in
the gaming industry today have worked so hard for so long to
bring about.'' The AGA further reported that it does not
believe the technology for exercising such controls with
respect to Internet gambling is yet available.
Testifying from a State perspective, the New Jersey
Director of Gaming Enforcement also noted that offshore
Internet gambling operations provide no tax revenue or jobs to
States, unlike State-regulated casinos.
In addition to the legal and economic challenges cited
above, problem gambling--including problem Internet gambling--
can lead to personal and family hardships, such as lost
savings, excessive debt, bankruptcy, foreclosed mortgages, and
divorce. In particular, Internet gambling is proving to be a
serious problem for many college students. At the July, 2001
hearings, the National Collegiate Athletic Association (NCAA)
underscored the vulnerability of young people to losing large
sums through Internet gambling. Accordingto a Nellie Mae survey
cited by the NCAA, 78 percent of college students have credit cards,
nearly a third have four or more credit cards, and one in ten will
graduate with balances over $7,000. One student reportedly lost $10,000
on Internet sports gambling over a three-month period. And, in another
case, a student reportedly lost $5,000 on a single Internet wager on
the Super Bowl and was forced to drop out of school. Further, recent
events show that professional athletes are not immune to the lure of
Internet gambling, as the sports pages have detailed the roughly
$500,000 owed by Washington Capitals hockey star Jaromir Jagr to a
Caribbean Internet betting site. The New Jersey Director of Gaming
Enforcement testified that the State of New Jersey had filed a suit
against certain offshore casinos found to be taking online bets from
minors in that State. Witnesses from the National Council on Problem
Gambling and the Compulsive Gambling Center testified about the
problems associated with compulsive or pathological gambling, and the
Christian Coalition, in a letter to a Member of the Committee, echoed
concerns about the impact of gambling on families and society and, in
particular, the impact of Internet gambling on the poor, youth, and
those who are already compulsive gamblers.
Because of the pervasive legal, economic and social
challenges posed by the rapid growth of Internet gambling, the
National Gambling Impact Study Commission unanimously
recommended in its 1999 final report that the Federal
government prohibit, with no new exemptions, all Internet
gambling not already authorized by law. The Commission also
recommended that legislation be adopted to prohibit wire
transfers to Internet gambling sites or to the banks which
represent them, and called on the government to develop
enforcement strategies that include credit card providers and
money transfer agencies that facilitate Internet gambling.
H.R. 2143, the Unlawful Internet Gambling Funding
Prohibition Act, builds on the recommendations of the National
Gambling Impact Study Commission by directing the Federal
functional regulators to prescribe regulations reasonably
designed to identify and prevent unlawful Internet gambling
transactions, and provides that an entity covered by the Act is
in compliance with the Act's requirements if it relies on
procedures established by a payment system pursuant to such
regulations, and such procedures comply with the regulations.
H.R. 2143 is intended to provide regulatory flexibility so that
compliance may be achieved through coding of transactions or--
for those financial instruments for which coding is not
viable--through alternative methods consistent with the bill's
goals. The bill contains the regulatory enforcement provisions
of H.R. 556, which passed the House of Representatives by voice
vote in the 107th Congress, and H.R. 21, reported favorably by
the Financial Services Committee on March 13, 2003 (H. Rept.
108-51, Part 1). Its provisions are similar to those
incorporated in the 107th Congress in the Committee-reported
version of H.R. 3004, the Financial Anti-Terrorism Act of 2001,
as well as to legislation adopted by the House Banking
Committee in the 106th Congress (H.R. 4419).
H.R. 2143 is not intended to spell out which activities are
legal and which are illegal with regard to Internet gambling;
rather, it relies on the substantive laws in effect at the time
a case is brought under the legislation, and law enforcement's
interpretation of the underlying law. It would not alter,
supersede or otherwise affect the application of the Indian
Gaming Regulatory Act, nor would it permit a State that
prohibits gambling to allow an out-of-State lottery to operate
in that State. H.R. 2143 would not in general apply to a
computer or video game that does not involve the staking or
risking of something of value, nor to a game of skill played,
created or distributed over the Internet. In short, any
activity which is illegal on the day before the enactment of
this legislation will still be illegal on the day after
enactment.
H.R. 2143 is not intended to impose new burdens on
financial institutions to identify which offshore gambling
sites may be engaged in unlawful activities. Rather, the
legislation contemplates a mechanism whereby banks and other
financial service providers can identify, block or prevent
payment to unlawful Internet gambling sites. The bill
recognizes that many credit card companies and credit card
banks are taking steps to identify, block or prevent Internet
gambling transactions, and provides for enforcement of this
bill 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.
Hearings
No hearings were held on this legislation in the 108th
Congress.
Committee Consideration
The Committee met in open session on May 21, 2003 and
ordered H.R. 2143, the Unlawful Internet Gambling Funding and
Prohibition Act, reported to the House with a favorable
recommendation by a voice vote, without amendment.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Oxley to report the bill
to the House with a favorable recommendation was agreed to by a
voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee made findings that are
reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
Using authority granted by this legislation, the Federal
functional regulators and the Federal Trade Commission under
applicable law (section 505(a) of the Gramm-Leach-Bliley Act),
will reduce the availability of illegal offshore Internet
gambling in the United States.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of budget authority, entitlement authority, or
tax expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 22, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2143, the Unlawful
Internet Gambling Funding Prohibition Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark Hadley
(for federal costs) and Cecil McPherson (for the impact on the
private sector).
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 2143--Unlawful Internet Gambling Funding Prohibition Act
Summary: H.R. 2143 would require financial institutions to
take steps to identify and block gambling-related transactions
that are transmitted through their payment systems. The Office
of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (FDIC), the Office of Thrift Supervision
(OTS), and the National Credit Union Administration (NCUA)
would enforce the provisions of H.R. 2143 as they apply to
financial institutions.
CBO estimates that implementing this legislation would
result in no significant cost to the federal government. By
increasing the costs of the FDIC and the Federal Reserve, the
bill could affect direct spending and revenues, but CBO
estimates that any such impacts would not be significant.
H.R. 2143 would create no new intergovernmental mandates as
defined in the Unfunded Mandates Reform Act (UMRA) and would
impose no costs on state, local, or tribal governments.
The bill would impose a private-sector mandate, but CBO
estimates that the direct costs of the mandate would fall well
below the annual threshold established in UMRA ($117 million in
2003, adjusted annually for inflation) in any of the next five
years.
Estimated cost to the Federal Government: Based on
information from the affected agencies, CBO estimates that the
cost of implementing H.R. 2143 would be small, and thus, that
the bill would have no significant net effect on the federal
budget. The NCUA, the OTS, and the OCC charge fees to cover all
their administrative costs; therefore, any additional spending
by those agencies toimplement the bill would have no net
budgetary effect. The FDIC uses deposit insurance premiums paid by
banks to cover the expenses it incurs to supervise state-chartered
institutions. Under current law, CBO estimates that the vast majority
of thrift institutions insured by the FDIC would not pay any premiums
for most of the 2004-2013 period, and we expect that a small increase
in FDIC spending would not trigger a significant change in its premium
income over this period. In total, CBO estimates that H.R. 2143 would
increase direct spending and offsetting receipts of the NCUA, OTS, OCC,
and FDIC by less than $500,000 a year over the 2004-2013 period.
The bill also would affect spending by the Federal Reserve.
Budgetary effects on the Federal Reserve are recorded as
changes in revenues (governmental receipts). Based on
information from the Federal Reserve, CBO estimates that
enacting H.R. 2143 would reduce such revenues by less than
$500,000 a year.
Estimated impact of state and local governments: H.R. 2143
would prohibit gambling businesses from accepting credit card
payments and other bank instruments from gamblers who bet
illegally over the Internet, the bill would not create a new
intergovernmental mandate as defined in UMRA. Under current
federal and state law, gambling businesses are generally
prohibited from accepting bets or wagers over the Internet.
Thus, H.R. 2143 does not contain a new mandate relative to
current law and would impose no costs on state, local, or
tribal governments.
Estimated impact on the private sector: H.R. 2143 would
impose a new federal mandate on the private sector. The bill
would require designated payment systems to establish policies
and procedures designed to identify and prevent transactions in
connection with unlawful Internet gambling. Designated payment
systems are defined in the bill to include any system utilized
by businesses such as creditor, credit card issuers, or
financial institutions to effect a credit transaction, an
electronic fund transfer, or other transfer of funds.
Information provided by representatives of the financial
services industry indicates that such transactions can
currently be identified through the use of codes. Most
financial institutions are currently able to identify and block
restricted transactions by using the coding system. Thus, CBO
estimates that the private sector's cost to comply with the
mandate would be small. CBO estimates that the total direct
costs for the private-sector mandate in this bill would fall
well below the annual threshold established in UMRA ($117
million in 2003, adjusted annually for inflation).
Previous CBO estimates: On May 15, 2003, CBO transmitted a
cost estimate for H.R. 21, the Unlawful Internet Gambling
Funding Prohibition Act, as ordered reported by the House
Committee on Financial Services on March 27, 2003. On May 16,
2003, CBO transmitted a cost estimate for H.R. 21 as ordered
reported by the House Committee on the Judiciary on May 14,
2003. The two versions of H.R. 21 are similar to H.R. 2143, and
the cost estimates of those provisions that affect the FDIC and
the Federal Board are indentical.
The private-sector mandate in H.R. 2143 is also continued
in both versions of H.R. 21. Our estimate that the total direct
costs of this mandate would fall well below the annual
threshold for private-sector mandates established in UMRA is
unchanged.
Estimate prepared by: Federal spending: Mark Hadley;
federal revenues: Mark Booth; impact on state, local, and
tribal governments: Victoria Heid Hall; impact on the private
sector: Cecil McPherson.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
defense and general welfare of the United States), and clause 3
(relating to the power to regulate foreign and interstate
commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section provides the short title of the bill, the
``Unlawful Internet Gambling Funding Prohibition Act.''
Section 2. Findings
This section provides certain Congressional findings. In
particular, Congress finds that: (1) Internet gambling is
primarily funded through the use of personal banking
instruments and plays a large role in the creation of
ultimately uncollectible personal debt; and (2) Internet
gambling is susceptible to abuse by money launderers.
Section 3. Policies and procedures required to prevent payments for
unlawful Internet gambling
Subsection (a) requires the Federal functional regulators
to prescribe regulations within six months requiring any
designated payment system to establish policies and procedures
reasonably designed to identify and prevent restricted
transactions.
Subsection (b) requires the Federal functional regulators,
in prescribing regulations, to identify types of policies and
procedures which would be reasonably designed to identify,
block or prevent a restricted transaction; to the extent
practical permit any participant in a payment system to choose
among alternative means of compliance; and consider exempting
restricted transactions where it is not reasonably practical to
identify and block, or otherwise prevent, such transactions.
Subsection (c) provides that 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, is in compliance with subsection
(a) if such person operates in reliance on procedures
established by the payment system pursuant to subsection (a).
Subsection (d) requires that this section be enforced by
the Federal functional regulators and the Federal Trade
Commission, and sets out factors to be considered in any
enforcement action 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.
Section 4. Definitions
Section 4 defines the terms ``restricted transaction'',
``designated payment system'', ``Federal functional
regulator'', ``Internet'', ``unlawful Internet gambling'',
``credit'', ``creditor'' and ``credit card'', ``electronic fund
transfer'', ``financial institution'', and ``money transmitting
business'' and ``money transmitting service.'' Paragraph (2)
defines the term ``bets or wagers'' as 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 with the agreement that the winner will receive
something of greater value than the amount staked or risked.
This subsection clarifies that ``bets or wagers'' does not
include a bona fide business transaction governed by the
securities laws; a transaction subject to the Commodity
Exchange Act; an over-the-counter derivative instrument and any
other transaction exempt from State gaming or bucket shop laws
pursuant to the Commodity Exchange Act or Securities Exchange
Act; a contract of indemnity or guarantee; a contract for life,
health, or accident insurance; a deposit with a depository
institution; certain participation in a simulation sports game
or education game; or a lawful transaction with a business
licensed or authorized by a State.
Changes to Existing Law Made by the Bill, as Reported
This legislation does not amend existing law.