Spitzer, banks target Internet gambling via credit card

December 11, 2007 by Casino tips and news
Filed under Casino news

New York Attorney General Eliot Spitzer has concluded contracts with ten banks in order to block cardholders from using their credit cards to perform transactions recognized as online gambling.

“This is a turning point in the credit card industry,” Spitzer explains. “The substantial majority of credit card issuers – and all issuers doing significant business with New York customers, has already recognized their legal, ethical, and business obligation to block credit-card transactions classified as online gambling.”

The initiative was started in June of 2002 when the Attorney General acquired Citibank’s agreement to block such transactions. The ten banks in this latest round of settlements cover a broad range of institutions. They include some of the country’s greatest financial institutions, with millions of cardholders all over the nation, as well as smaller, regional banks. Some are state-chartered banks, whereas others are national banks.

These ten banks include:

* Wells Fargo Financial Bank, based in Des Moines, Iowa.

* USAA Federal Savings Bank, based in San Antonio, Texas;

* U.S. Bank NA, based in Fargo, North Dakota;

* Trustco Bank, based in Schenectady, New York;

* Peoples Bank, headquartered in Bridgeport, Connecticut;

* Merrick Bank, based in South Jordan, Utah;

* First Premier Bank, based in Sioux Falls, South Dakota;

* First Consumers National Bank, based in Beaverton, Oregon;

* Chemung Canal Trust Company, based in Elmira, New York;

* Cayuga Bank, based in Auburn, New York (now First Niagara Bank);

The operations carried out by credit card is “scrambled”, the traders and their commercial banks in order to indicate to the credit card issuing bank (lender) which has been purchased. By blocking some of these codes, issuing banks can extend credit to prevent gambling activity that takes place on the Web.

These banks have already agreed to block such transactions, and have also agreed to pay a total sum of 335,000 U.S. dollars in costs to the state of New York. The agreements apply to all lending activities, whether arising in New York or affecting New Yorkers. However, it is expected that the effect of the settlements will lead the operations of banks in other states, such as banks likely destination of most credit card issuers and for obstructing operations through its systems in whole.

In addition, the settlement marks a trend in law enforcement to focus on intermediaries in combating illegal Internet activity. In New York, as in most states, promotion or facilitation of betting and gambling is illegal unauthorized, whether it takes place online or offline. However, due to the fact that gambling on the Internet, companies typically operate offshore in foreign locations, beyond the power of enforcement by local authorities, tend to avoid prosecution. Spitzer says that, therefore, it is necessary for financial institutions, including banks, credit card associations, and other payment processing services, do everything possible to prevent the facilitation of these illicit procedures.