Citibank, PayPal block online gambling transactions

08/01/2002
Citibank, the largest issuer of credit cards in the United States, will no longer allow the use of its Visa or MasterCard credit cards for online gambling transactions.

Citibank, the largest issuer of credit cards in the United States, will no longer allow the use of its Visa or MasterCard credit cards for online gambling transactions. Coupled with similar action by other large credit card systems, the move could significantly decrease money laundering opportunities through that far-flung cyberspace industry. Gambling proceeds There is no law in the U.S. that directly makes online gambling illegal. But the U.S. money laundering law prohibits financial transactions involving the proceeds of illegal gambling. (Title 18, USC Sec. 1956(c)(7)).

Online gambling is huge Online gambling is a huge industry that is now luring legitimate U.S. gambling interests to enter the field, such as those in Las Vegas. According to comScore Media Metrix, an Internet audience measurement service, the number of unique visitors to the top 20 casino websites in June 2002 was 19 million. That is nearly 16% of all U.S. Internet users, according to the service, up from 14% in January 2002.

Presently, online gambling businesses usually operate offshore beyond the reach of U.S. enforcement agencies. Several bills in Congress propose tougher criminal penalties on financial businesses that allow these transactions to be processed through their credit or debit cards or other facilities.

Other banks take similar steps Citibank controls 12% of the nation’s credit card market with 33 million Visa and MasterCard holders. Other large U.S. banks, including Bank of America, Fleet, MBNA and JPMorgan Chase, have taken similar steps to block the use of their credit cards for online gambling transactions. Citibank finalized procedures to block the transactions in July.

Transactions blocked How does an institution know a credit card is used for online gambling transactions? Maria Mendler, spokesperson for Citibank, says the cards rely on codes that illustrate the type of transaction. Many credit card statements list those category codes showing what customers spent on entertainment or travel every month, for example.

“We’re blocking the transactions that Visa or MasterCard has coded for Internet gambling,” Mendler said.

For Citibank’s Visa or MasterCard customers who try using those credit cards for online gambling, the transaction is blocked.

Other payment systems follow suit PayPal, an online payment service that facilitates the exchange of money via email, recently announced it would no longer process online casino transactions due to “the uncertain regulatory environment surrounding online gaming.” The decision was made after the company was purchased by the online marketplace eBay recently.

The decision by Citigroup, PayPal and the other institutions is not the death knell of electronic payments of online gambling obligations.

It is not the death knell Several online payment methods, including some that work like a debit card, or that permit online money transfers, or provide the equivalent of an online wallet enabling deposits, withdrawals, and transfers still exist and are proliferating. Credit card companies are not the only ones worried about connections to online gambling. I. Nelson Rose, a professor at Whittier Law School and author of several books about gambling law, says several “middle men” have cause to worry as well.

“Because anti-racketeering and money-laundering statutes sometimes might be involved, any individual who plays any role can be a potential criminal defendant,” Rose writes. “Gaming operators and patrons have the most immediate concerns, but inquiries have come from developers of gaming software,… Internet service providers,… and operators of non-gaming websites, who would like to link with gaming sites.”