Internet gambling rule livable; more time needed

Dec. 17, 2007—NAFCU last week told Treasury and the Federal Reserve Board that their approach to implementing last year’s Internet gambling law is reasonable given the law’s challenging mandate, but it said credit unions need more time to comply.

The rule sets requirements for adhering to a federal law barring gambling businesses from accepting payments in connection with unlawful Internet gambling, including payments by credit card, electronic funds transfer or check.

Regulators are proposing that businesses have in place policies and procedures to prevent the processing of illegal payments, but instead of applying this to all points of the transaction, they apply it to the business that has the relationship with the gambling establishment accepting the payment. Most credit unions, then, would be able to rely on the adequacy of the policies and procedures in place at the payment systems in which they participate. Payment systems are also free to block all gambling transactions if they wish.

NAFCU generally favors the regulators’ approach in implementing the statute but expressed reservations about the growing law enforcement responsibilities being placed on credit unions. Depository institutions should be primarily responsible for the safe, sound provision of financial services and “not to surveil consumers for criminal behavior or immoral activity,” stated Dan Berger, NAFCU’s senior vice president of government affairs.

The regulators have proposed a six-month compliance period, but NAFCU is recommending a minimum of 12 months so all those affected have time to ensure that their policies and procedures will be effective in flagging and preventing restricted transactions.