[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 21 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 21
To prevent the use of certain bank instruments for unlawful Internet
gambling, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 7, 2003
Mr. Leach (for himself, Mr. Oxley, Mr. Rogers of Michigan, Mr.
Pickering, Mr. Norwood, Mr. Goodlatte, Mr. Bachus, Mrs. Kelly, Mr.
Wolf, Mr. Spratt, Mr. Osborne, Mr. Pitts, Mr. Berry, and Mr. Gillmor)
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
_______________________________________________________________________
A BILL
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 the business of betting or
wagering 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 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.
(2) Business of betting or wagering.--The term ``business
of betting or wagering'' does not include, other than for
purposes of subsection (e), any creditor, credit card issuer,
insured depository institution, 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, stored value
product transaction, or money transmitting service, or any
participant in such network, or any interactive computer
service or telecommunications service.
(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 Secretary, in consultation with the Board of Governors of
the Federal Reserve System and the Attorney General,
determines, by regulation or order, could be utilized in
connection with, or to facilitate, any restricted transaction.
(4) Internet.--The term ``Internet'' means the
international computer network of interoperable packet switched
data networks.
(5) Interactive computer service.--The term ``interactive
computer service'' has the same meaning as in section 230(f) of
the Communications Act of 1934.
(6) Restricted transaction.--The term ``restricted
transaction'' means any transaction or transmittal involving
any credit, funds, instrument, or proceeds described in any
paragraph of subsection (a) which the recipient is prohibited
from accepting under subsection (a).
(7) 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.
(8) 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'' 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.--
(i) In general.--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.
(ii) Rule of construction.--No provision of
this section shall be construed as altering,
superseding, or otherwise affecting the
application of the Indian Gaming Regulatory
Act.
(3) Expedited proceedings.--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.
(4) Limitation relating to interactive computer services.--
(A) In general.--Relief granted under this
subsection against an interactive computer service
shall--
(i) be limited to the removal of, or
disabling of access to, an online site
violating this section, or a hypertext link to
an online site violating this section, that
resides on a computer server that such service
controls or operates; except this limitation
shall not apply if the service is subject to
liability under this section pursuant to
subsection (e);
(ii) be available only after notice to the
interactive computer service and an opportunity
for the service to appear are provided;
(iii) not impose any obligation on an
interactive computer service to monitor its
service or to affirmatively seek facts
indicating activity violating this section;
(iv) specify the interactive computer
service to which it applies; and
(v) specifically identify the location of
the online site or hypertext link to be removed
or access to which is to be disabled.
(B) Coordination with other law.--An interactive
computer service that does not violate this section
shall not be liable under section 1084 of title 18,
except this limitation shall not apply if an
interactive computer service has actual knowledge and
control of bets and wagers and--
(i) operates, manages, supervises, or
directs an Internet website at which unlawful
bets or wagers may be placed, received, or
otherwise made or at which unlawful bets or
wagers are offered to be placed, received, or
otherwise made; or
(ii) owns or controls, or is owned or
controlled by, any person who operates,
manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be
placed, received, or otherwise made or at which
unlawful bets or wagers are offered to be
placed, received, or otherwise made.
(5) Factors to be considered in certain cases.--In
considering granting relief 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
court 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 subsection
(f).
(D) The feasibility that any specific remedy
prescribed in the order issued under this subsection
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.
(6) Notice to regulators and financial institutions.--
Before initiating any proceeding under paragraph (2) with
respect to a violation or potential violation of this section
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, the
Attorney General of the United States or an attorney general of
a State (or other appropriate State official) shall--
(A) notify such person, and the appropriate
regulatory agency (as determined in accordance with
subsection (f)(5)) for such person, of such violation
or potential violation and the remedy to be sought in
such proceeding; and
(B) allow such person 30 days to implement a
reasonable remedy for the violation or potential
violation, consistent with the factors described in
paragraph (5) and in conjunction with such action as
the appropriate regulatory agency may take.
(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 illegal bets or wagers or sending, receiving,
or inviting information assisting in the placing of bets or
wagers.
(e) Circumventions Prohibited.--Notwithstanding subsection (b)(2),
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 any participant in such
network, or any interactive computer service or telecommunications
service, may be liable under this section if such creditor, issuer,
institution, operator, business, network, or participant has actual
knowledge and control of bets and wagers and--
(1) operates, manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be placed,
received, or otherwise made or at which unlawful bets or wagers
are offered to be placed, received, or otherwise made; or
(2) owns or controls, or is owned or controlled by, any
person who operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may be
placed, received, or otherwise made or at which unlawful bets
or wagers are offered to be placed, received, or otherwise
made.
(f) Policies and Procedures To Identify and Prevent Restricted
Transactions in Payment for Unlawful Internet Gambling.--
(1) Regulations.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the
Secretary of the Treasury, in consultation with the Board of
Governors of the Federal Reserve System and the Attorney
General, 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:
(A) The establishment of policies and procedures
that--
(i) 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
(ii) block restricted transactions
identified as a result of the policies and
procedures developed pursuant to clause (i).
(B) 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.
(2) Requirements for policies and procedures.--In
prescribing regulations pursuant to paragraph (1), the
Secretary shall--
(A) 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;
(B) 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
(C) consider exempting restricted transactions from
any requirement under paragraph (1) if the Secretary
finds that it is not reasonably practical to identify
and block, or otherwise prevent, such transactions.
(3) 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 paragraph (1) if--
(A) 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--
(i) identify and block restricted
transactions; or
(ii) otherwise prevent the acceptance of
the products or services of the payment system,
member, or participant in connection with
restricted transactions; and
(B) such policies and procedures of the designated
payment system comply with the requirements of
regulations prescribed under paragraph (1).
(4) No liability for blocking or refusing to honor
restricted transactions.--A person that is subject to a
regulation prescribed or order issued under this subsection and
blocks, or otherwise refuses to honor, a restricted
transaction, or as a member of a designated payment system
relies on the policies and procedures of the payment system, in
an effort to comply with this section shall not be liable to
any party for such action.
(5) Enforcement.--This subsection 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.
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. AMENDMENTS TO GAMBLING PROVISIONS.
(a) Amendment to Definition.--Section 1081 of title 18, United
States Code, is amended--
(1) by designating the five undesignated paragraphs that
begin with ``The term'' as paragraphs (1) through (5),
respectively; and
(2) in paragraph (5), as so designated--
(A) by striking ``wire communication'' and
inserting ``communication'';
(B) by inserting ``satellite, microwave,'' after
``cable,''; and
(C) by inserting ``(whether fixed or mobile)''
after ``connection''.
(b) Increase in Penalty for Unlawful Wire Transfers of Wagering
Information.--Section 1084(a) of title 18, United States Code, is
amended by striking ``two years'' and inserting ``5 years''.
<all>