To prevent the use of certain bank instruments for unlawful Internet gambling, and for other purposes.

February 12, 2001

Mr. LEACH introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To prevent the use of certain bank instruments for unlawful Internet gambling, and for other purposes.

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.

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. PROHIBITION ON ACCEPTANCE OF ANY BANK INSTRUMENT FOR UNLAWFUL INTERNET GAMBLING.

(a) IN GENERAL- No person engaged in a gambling business 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 the other person;

(3) 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

(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 the other person.

(b) DEFINITIONS- For purposes of this Act, the following definitions shall apply:

(1) 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 predominantly 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; and

(D) does not include--

(i) any bona fide business transaction 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 at a future date of securities (as that term is defined in section 3(a)(10) of such Act);

(ii) any transaction on or subject to the rules of a contract market designated pursuant to section 5 of the Commodity Exchange Act;

(iii) any over-the-counter derivative instrument;

(iv) any contract of indemnity or guarantee;

(v) any contract for life, health, or accident insurance; or

(vi) 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.

(2) GAMBLING BUSINESS- The term `gambling business' means--

(A) a business that is conducted at a gambling establishment;

(B) a business that--

(i) involves--

(I) the placing, receiving, or otherwise making of bets or wagers; or

(II) the offering to engage in the placing, receiving, or otherwise making of bets or wagers;

(ii) involves 1 or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and

(iii) has been or remains in substantially continuous operation for a period in excess of 10 days or has a gross revenue of $2,000 or more from such business during any 24-hour period; and

(C) any agent who knowingly solicits for a business described in subparagraph (A) or (B).

(3) INTERNET- The term `Internet' means the international computer network of interoperable packet switched data networks.

(4) UNLAWFUL INTERNET GAMBLING- The term `unlawful Internet gambling' means to place, receive, or otherwise make 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.

(5) 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 4 of the Uniform Commercial Code, as in effect in any State.

(C) FINANCIAL INSTITUTION- The term `financial institution' has the meaning given such term in section 903 of the Electronic Fund Transfer 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.

(E) SECRETARY- The term `Secretary' means the Secretary of the Treasury.

(c) CIVIL REMEDIES-

(1) JURISDICTION- The district courts of the United States shall have original and exclusive jurisdiction to prevent and restrain violations of this section by issuing appropriate orders in accordance with this section, regardless of whether a prosecution has been initiated under this section.

(2) PROCEEDINGS-

(A) INSTITUTION BY FEDERAL GOVERNMENT-

(i) IN GENERAL- The United States, acting through the Attorney General, may institute proceedings under this subsection to prevent or restrain a violation of this section.

(ii) RELIEF- Upon application of the United States under this subparagraph, the district court may enter a preliminary injunction or an injunction against any person to prevent or restrain a violation of this section, in accordance with Rule 65 of the Federal Rules of Civil Procedure.

(B) INSTITUTION BY STATE ATTORNEY GENERAL-

(i) IN GENERAL- The attorney general of a State (or other appropriate State official) in which a violation of this section allegedly has occurred or will occur may institute proceedings under this subsection to prevent or restrain the violation.

(ii) RELIEF- Upon application of the attorney general (or other appropriate State official) of an affected State under this subparagraph, the district court may enter a preliminary injunction or an injunction against any person to prevent or restrain a violation of this section, in accordance with Rule 65 of the Federal Rules of Civil Procedure.

(C) INDIAN LANDS- Notwithstanding subparagraphs (A) and (B), for a violation 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 subparagraph (A); 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.

(3) EXPEDITED PROCEEDINGS-

(A) IN GENERAL- In addition to any proceeding under paragraph (2), a district court may, in exigent circumstances, enter a temporary restraining order against a person alleged to be in violation of this section upon application of the United States under paragraph (2)(A), or the attorney general (or other appropriate State official) of an affected State under paragraph (2)(B), in accordance with Rule 65(b) of the Federal Rules of Civil Procedure.

(d) CRIMINAL PENALTY-

(1) IN GENERAL- Whoever violates this section shall be fined under title 18, United States Code, or imprisoned for not more than 5 years, or both.

(2) PERMANENT INJUNCTION- Upon conviction of a person under this subsection, 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.

(e) SAFE HARBOR FOR FINANCIAL INTERMEDIARIES-

(1) IN GENERAL- No creditor, credit card issuer, financial institution, operator of a terminal at which an electronic fund transfer may be initiated, money transmitting business, or national, regional, or local network utilized to effect a credit transaction, electronic fund transfer, or money transmitting service shall be liable under this section for the involvement of such person, or the use of the facilities of such person--

(A) in any credit transaction, electronic fund transfer, or money transmitting service described in subsection (a); or

(B) in drawing, paying, transferring, or collecting any check, draft, or other instrument described in subsection (a) or in any regulation prescribed under such subsection.

(2) EXCEPTION FOR KNOWING PARTICIPATION IN A GAMBLING BUSINESS- Paragraph (1) shall not apply with respect to any person referred to in such paragraph which is a gambling business or which knowingly participates in any activity referred to in subparagraph (A) or (B) of such paragraph as an agent or representative of a gambling business.

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

(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.

(b) REPORT REQUIRED- The Secretary of the Treasury shall submit an annual report to the Congress on the deliberations between the United States and other countries on issues relating to Internet gambling.

SEC. 5. ENFORCEMENT ACTIONS.

Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is amended by adding at the end the following new subsection:

`(x) DEPOSITORY INSTITUTION INVOLVEMENT IN INTERNET GAMBLING- Notwithstanding section 3(e) of the Unlawful Internet Gambling Funding Prohibition Act, if any appropriate Federal banking agency determines that any insured depository institution is engaged in any of the following activities, the agency may issue an order to such institution prohibiting such institution from continuing to engage in any of the following activities:

`(1) Extending credit, or facilitating an extension of credit, electronic fund transfer, or money transmitting service with the actual knowledge that any person is violating section 3(a) of the Unlawful Internet Gambling Funding Prohibition Act in connection with such extension of credit, electronic fund transfer, or money transmitting service.

`(2) Paying, transferring, or collecting on any check, draft, or other instrument drawn on any depository institution with the actual knowledge that any person is violating section 3(a) of the Unlawful Internet Gambling Funding Prohibition Act in connection with such check, draft, or other instrument.'.

END