Indictment Comes as Feds Consider Legalizing, Taxing Online Gambling
- Wired News
A federal grand jury has indicted a Canadian man accused of assisting
overseas online gambling sites process hundreds of millions of dollars
in payments, the authorities said Thursday.
Although federal law prohibits financial institutions from knowingly
assisting in online payouts of chance gaming like poker, blackjack,
slot machines and other games, the U.S. market for such wagering is
huge, and lawmakers are looking to tax gambling revenue rather than
criminalize it.
Online gambling is a cash cow. Consider Thursday's announced case
targeting Douglas Rennick, a 34-year-old Canadian. The United States
has charged him with processing or "laundering" as much as $565
million in gambling payments through phony companies, just during the
last two years alone.
Rennick is accused of using institutions like Washington Mutual, Union
Bank and others to process the payments by falsely representing to
those institutions "that the accounts would be used for such purposes
as issuing rebate checks, refund checks, sponsorship checks, affiliate
checks and minor payroll processing" for retailers and auto
dealerships.
If found guilty, Rennick faces a maximum 30-year prison sentence,
although the top sentence is rarely handed down.
The Unlawful Internet Gambling Enforcement Act of 2006 was part of a
law to combat terrorism in a bid to control money laundering. Many
overseas internet gambling sites have blocked access to the United
States, while many others have not.
Among other things, the law prohibits U.S. banks from knowingly
acting as a financial middleman for online gambling transactions.
Lotteries and horse racing is exempted. The act also prohibits credit
card companies from collecting payments for bets.
Under U.S. Treasury and Federal Reserve rules, financial companies
have until the end of December to "establish and implement policies
and procedures that are reasonably designed to prevent payments to
gambling businesses in connection with unlawful internet gambling."
A proposed law to repeal that act and license internet gambling and
tax it is stalled in a House committee. The Poker Player's Alliance
supports the legislation, and estimates as many as 10 million
Americans wager about $6 billion online annually.
Still, enforcing the prohibition, and wire fraud and money laundering
rules associated with internet gambling, has kept the Justice
Department busy.
The DOJ has been waging a war of intimidation to scare operators and
payment processors and players not to do gambling on the internet,"
said Nelson Rose, who runs the GamblingAndTheLaw website. "That's
separate than what's going on in Congress."
In June, for example, the Justice Department ordered Citibank, Wells
Fargo, Goldwater Bank and Alliance Bank of Arizona to halt as much as
$34 million in gambling proceeds scheduled to be paid to 27,000 online
poker players across the United States.
That was the first time the government targeted actual gamblers,
instead of the sites or financial institutions associated with online
gambling.
In addition to dozens of other busts, the founder and software maker
of the popular online gambling site, PartyGaming, pleaded guilty in
December to fostering illegal internet gambling. Anurag Dikshit
agreed to pay $300 million in fines, and block American's from online
money gambling.