Time Ticking Down for Gov to Implement UIGEA Rules

Since the first online casino opened its virtual doors about 12 years ago, certain members of Congress have unsuccessfully tried to pass legislation aimed at prohibiting online gaming. No matter how powerful or influential, no Congressman was able to successfully persuade Congress to pass anti-gaming legislation.

After many years of failed efforts, the Unlawful Internet Gambling Enforcement Act (UIGEA) was finally snuck through Congress in late 2006. As we all now know, the bill does not make online poker illegal nor does the bill change gaming law. What it does is to make it more difficult to get money into a site by forbidding U.S. financial Institutions from funding the type of online gambling that the law has previously made illegal.

270 Days

The UIGEA requires the Secretary and the Board of Governors of the Federal Reserve System, in consultation with the Attorney General, to prescribe regulations to identify and block transactions to online gaming sites within 270 days of October 13, 2006, when President Bush signed the bill into law.

When time limits are involved, Federal Rule of Civil Procedure, Rule 6 usually requires us not to count the very day from which the designated period of time begins to run nor the weekend if the time limit ends on a weekend. My calculations make July 10 the compliance date.

The Process

The process of making rules and regulations so that banks know which transactions to reject falls naturally upon two entities, the Federal Reserve and the Attorney General's office.

The Federal Reserve is the central bank of the United States, founded by Congress in 1913 to provide our nation with a safe, flexible, and stable financial system. Its unique structure includes a federal government agency, the Board of Governors, and 12 regional Reserve Banks. The Federal Reserve is the logical starting place for creating bank regulations because that is one of its ordinary tasks.

However, it is the job of the Attorney General's office to prosecute crimes. To do that, this arm of the government investigates and is held to have knowledge regarding possible criminal activity. The AG's office investigates such things as online gaming. Together, the two entities have been charged with creating procedures to prohibit the funding of online gaming sites.

The Attorney General's Office

The Attorney General is appointed by the President of the United States and confirmed by the United States Senate. Alberto R. Gonzales was sworn in as the nation's 80th Attorney General on February 3, 2005. Prior to serving at the Department of Justice, he was counsel to President George W. Bush in January of 2001. In other words, Gonzales and the president are buddies. It is not unusual that the president appoints his most loyal associates to serve in his cabinet.

Under the tutelage of Gonzales, eight U.S. Attorneys were suspiciously fired in 2006. Although U.S. Attorneys serve at the will of the president, they cannot be fired for illegal reasons. A Congressional investigation into the matter is focusing on whether the Department of Justice and the White House were using the U.S. Attorney positions for political gain. It appears that some of the attorneys were targeted for dismissal to impede investigations of Republican politicians and that some were targeted for their failure to initiate investigations that would damage Democratic politicians or hamper Democratic-leaning voters.

The Congressional hearings have uncovered a myriad of ugly events demonstrating that Gonzales has not been as forthcoming as he would have Congress believe.

Senate Democrats have announced that they will be introducing a no-confidence resolution in June when Congress reconvenes. The one-sentence resolution says, "It is the sense of the Senate that Attorney General Alberto Gonzales no longer holds the confidence of the Senate and the American people."

The AG's Input

What has Gonzales been doing to fashion the proper rules and regulations required by the UIGEA? What we know for sure is that Gonzales is busy trying to save his job. What we also can deduce is that Gonzales doesn't think we can come up with adequate controls. We know that because of what Gonzales said during the recent Congressional hearing when he was questioned by Senator Jon Kyl (R-AZ), who used the hearing for his own political agenda. Although the issue at the hearing centered around the improprieties of Gonzales' soffice, Kyl took the opportunity to cross-examine Gonzales about the UIGEA rules and regulations.

The Kyl/Gonzales Exchange

At the recent Senate hearing, Kyl questioned Gonzales about the anticipated UIGEA rules. Kyl was trying to get Gonzales to agree on a procedure that would stop online funding, but Gonzales basically said that the AG's office prosecutes people after they commit crimes. Here's an excerpt:

GONZALES: Senator, I think -- there's some operational issues for us, quite frankly, with respect to whether or not we can develop such a -- what we're saying is, these guys are breaking the law. And quite frankly, there's no amount -- what we do is we prosecute that. And so I know my staff has been consulting with your staff, trying to work through this. Because I'm as anxious as you are to try to get these regulations working so we can do a better job of enforcing the law against these…

KYL: But providing that information, specifically, to the financial institutions would offer them certainty as to their legal obligations, and would assist them in ensuring that the law would be effectively
enforced, would it not?

GONZALES: It would certainly provide more certainty. And I'm not saying it can't be done. We're trying to work through this, Senator. And I understand -- I certainly understand your interest in this. And my staff is working as hard as we can to see if we can find a way to do this.

KYL: Well, what I'm interested in, though, since Treasury doesn't have access to the same information DOJ does, and the list of these improper sites needs to come from DOJ rather than Treasury, and the regulations are to be provided by Treasury, in consultation with the Department of Justice, whether you will agree with us that the Department of Justice should do everything it can to gather this information together and provide it to the Department of Justice -- excuse me -- Department of Treasury, not just once, but on some appropriate ongoing basis.

GONZALES: Sir, what I can commit to you is that we're going to do everything we can to make sure these regulations are strong and we get them implemented as quickly as we can. That's what I can commit to you, sir. I know this is an important issue to you. It's an important issue to me. But we need to do it the right way. And I think we can -- I'm not saying we can't do this list. We're still looking at this very, very hard.

Still Looking

Although the AG's office has little more than a month to come up with regulations, they are "still looking" at the issue. This means they are not close to fashioning competent regulations with any teeth.
It is quite possible that the AG's office is still reviewing the issue because they have taken to heart, the comments of representatives of financial institutions when the UIGEA was passed.

"The bill sets up banks to police a social issue," said Laura Fisher, spokeswoman for the American Bankers Association. "It's not something we want to encourage."

The bill passed by Congress could allow regulators to exempt checks and money transfers because they are more difficult to track. "Analyzing 40 billion checks a year would be a largely manual process," Fisher said. "If checks are not exempt, this would break our banks as it would be too costly to enforce." If checks are exempt, players could simply send a check to an online site."

AG Gonzales must know that banks cannot police checks. And that is just one avenue. What about Western Union? What about cashier's checks? Those are the methods I have seen as of late. If those simple methods cannot be regulated, just what IS being regulated? Many players don't try to use credit cards any more. When players wants to deposit their hard-earned money into an offshore site to have a little evening fun, there are a myriad of methods that U.S. regulations cannot touch.

What are Citizens to Do?

The bottom line is that when our government tries to prohibit citizens from spending our money, we will react badly and find a legitimate way to spend our hard-earned money as we choose. We can open a bank account in Canada, wire money, or send a cashier's check. We can go to our favorite online site and review all the legal ways to transfer money.

Whatever regulations Gonzales and his cronies construct, creative players will find legitimate ways around those regulations.

My prediction is that our government will not be able to create rules and regulations with any teeth whatsoever.