Posted January, 16 2007
Through this Operations Bulletin, NACHA calls attention to current laws and forthcoming regulations that may affect the ACH Network.
On October 13, 2006, the President signed into law the SAFE Port Act which, among other things, contained the Unlawful Internet Gambling Enforcement Act of 2006 (“Internet Gambling Act”). The Internet Gambling Act specifically prohibits some, but not all, kinds of Internet gambling. In addition, it requires the Department of Treasury and the Federal Reserve, in consultation with the Department of Justice, to prescribe regulations to require that designated payment systems and their respective participants identify and block payments for illegal Internet gambling transactions. The agencies must issue these regulations within 270 days of the law’s enactment, which is on or around July 9, 2007.
Although NACHA is working with the agencies to determine how the new regulations will affect the ACH Network, NACHA understands that the Department of Justice believes that existing federal law prohibits many Internet gambling transactions and that in many cases the Internet Gambling Act merely restates the current law. For example, a court has ruled that a sports betting Internet gambling site violated the Wire Act and enjoined processing payments for that site. However, the full scope of any existing prohibition against Internet gambling, and the processing of payments for Internet gambling sites, under federal law is unclear and has not been fully tested in the courts.
Financial institutions should be aware that Internet gambling operations may be contrary to existing federal or state law. Knowingly originating or processing ACH entries on behalf of companies that are directly involved in, or companies that facilitate, illegal Internet gambling involves legal risk for ODFIs and merchant processors.
NACHA reminds financial institutions that (i) they should know their customers and (ii) they should not be originating for companies doing illegal business. Also, in the case of financial institutions processing entries that are received through a third-party service provider, the financial institutions should know their customer’s customer.
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Questions about this ACH Operations Bulletin should be submitted via firstname.lastname@example.org.
1 Pub. L. 109-347.
2 See, United States v. Betonsports PLC, et al., No. 4:06CV01064 CEJ (E.D. Missouri).