CUNA: Internet gambling law's burdens need Hill's action

WASHINGTON (4/3/08)—Credit Union National Association (CUNA) board member

CUNA board member Harriet May, CEO of GECU, El Paso, Texas, greets House Financial Services Committee member, Rep. Luis Gutierrez (D-Ill.) before testifying at that panel's look a the Internet gambling law passed in 2006. CUNA Vice President of Legislative Affairs Ryan Donovan is far left in picture. (Photo provided by Bob Knudsen.)

Harriet May Wednesday urged Congress to address burdens that would be imposed on credit unions and other financial institutions seeking to comply with the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.

The U.S. Treasury Department and Federal Reserve Board were jointly charged under the law with drafting implementing regulations, a task the Fed has publicly called "challenging." The Fed has noted that its challenge is to craft a role for financial institutions without having an adverse effect on the country's payment system. The UIGEA rules have not been finalized.

May, testifying before the House Financial Services Committee, reiterated CUNA's concerns that credit unions could be swamped by the compliance burden associated with UIGEA. She stated that the proposal as issued should not be adopted. May is CEO of GECU of El Paso, Tex.

Under the Internet gambling law, financial institutions must establish and implement policies and procedures to identify and block restricted transaction or rely on those established by the payments system.

"We are concerned that the scope of these requirements is not realistic," May told the House panel.

She added that one of credit unions' fundamental fears is that they already have an "extraordinary" burden with "heavy policing responsibilities" under the Bank Secrecy Act and Office of Foreign Assets Control rules. She warned that any increased policing role could interfere with financial institutions' fundamental business to provide financial services to their communities.

May said that while CUNA does not support or condone illegal Internet gambling the current statute and implementing proposal create great concerns for financial institutions, which are particularly untimely given the current economic crisis. However, the CUNA witness made the following additional points:

• Any final rule should provide a mechanism to verify when a payment transaction is intended for illegal Internet gambling;

• It should define what is meant in its directive that covered entities address "due diligence;" currently it noted the term without defining or explaining what is meant by it;

• It should clarify what are institutions' "due diligence" requirements, a term is which is used but not defined in the proposal; and

• Because of the problems and complexities that will be association with implementation, institutions should have at least 18 months to determine how to meet the new requirements.

"The bill could be a vehicle for the Department of Justice to take the lead in not only monitoring the entities that are complying with registration, but also developing a list of those businesses or individuals involved in illegal Internet gambling activities."

Remaining witnesses before the committee were Louise L. Roseman, director of the division of reserve bank operations and payment systems, of the Federal Reserve System. Valerie Abend, deputy assistant secretary for critical infrastructure protection and compliance policy, of the Treasury Department, and representatives from The Financial Services Roundtable, Wells Fargo & Co., and the American Bankers Association.

Resource Links

CUNA e-Guide on Internet Gambling