WASHINGTON -- As the credit union trades sit down to digest the new proposed rule, issued by the Treasury Department and Federal Reserve Board last week implementing the Unlawful Internet Gambling Enforcement Act, they already know one thing: it is not all they hoped for.
The law prohibits gambling businesses from accepting payments in connection with unlawful Internet gambling, including payments made through credit cards, electronic funds transfers, and checks. The proposal would require U.S. financial firms that participate in designated payment systems to have policies and procedures "reasonably designed to identify and block or otherwise prevent or prohibit transactions in connection with unlawful Internet gambling." Examples are provided.
Certain exemptions are provided for in the proposal. "The Agencies are proposing to exempt all participants in the ACH systems, check collection systems, and wire transfer systems, except for the participant that possesses the customer relationship with the Internet gambling business," it reads. Additionally, certain participants that receive certain cross-border transactions from or send them to foreign
payment service providers could be exempted.
Card systems were not exempted in the proposed regulation because they have developed merchant category and transaction codes to identify the line of business, such as an online gambling company.
According to the rule approximately 7,600 credit unions would be affected. Given that, CUNA Senior Vice President and Deputy General Counsel Mary Dunn said that she feels the agencies listened to the trade group's concerns and made some modifications. However, she said, "There is one big gaping problem with this proposal. It doesn't specifically identify the illegal entities." Dunn acknowledged that it might be costly for the government to do this but it would be the best way to help ensure compliance.
NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt commented, "From an operational standpoint, we're working with our members and the Fed to ensure credit unions aren't policing these transactions." She said the burden per record keeper was estimated by the government to be 24 hours, but generally speaking government estimates are low because they do not take into consideration training as new employees come and go and necessary software upgrades.
Earlier this year, House Financial Services Committee Chairman Barney Frank (D-Mass.) introduced legislation to repeal some part of the law. "I do think that that's had an impact on this is implemented," Dunn said.
Both lawyers expressed concern for credit unions that any day, any reg now could be the "straw that broke the camel's back," as Hunt said.
Comments on the proposed rule are requested by December 12, 2007.