"Americans now waste $4 billion a year on this pernicious form
of gambling," Spitzer said. "With this agreement, we will cut off
an enormous line of credit that was a jackpot for illegal offshore
casinos."
Holding card issuers liable for on-line gambling is a new
concept. Friday’s announcement made no mention of legal action
having been taken or threatened against Citibank; but it is
implied. In New York, the promotion of unauthorised betting and
gambling is illegal. However, internet gambling businesses can
legally operate in other US states and abroad, beyond the
enforcement power of local authorities.
Several bills currently pending in the US Congress would place
new restrictions and criminal penalties on financial entities that
facilitate illegal gambling transactions. Spitzer warned that even
under current US law, however, the processing of known gambling
transactions may lead to liability for facilitating or aiding and
abetting the underlying activity, and may render the transactions
unenforceable.
Under the agreement, Citibank will block transactions that are
identified by casinos and web sites as on-line gambling. Citibank
also agreed to make payments to organisations that combat
compulsive gambling and aid those affected by it, and will pay
$100,000 in costs to the State of New York.
Noting that it is often difficult to prosecute on-line casinos,
Spitzer said it was “essential that financial entities, including
banks, credit card associations, and other payment and processing
services, do everything in their power to avoid facilitating these
illegal and harmful transactions.”
When initiated, credit card transactions are "coded" to indicate
what is being bought or sold. By blocking certain codes, banks that
issue credit cards can avoid issuing credit for much (but not all)
gambling activity that occurs on the internet.
Over the past few years, large US credit card issuers, including
as Bank of America, Fleet, Direct Merchants Bank, MBNA, and Chase
Manhattan Bank have begun blocking such transactions. Until the
Attorney General began his investigation, Citibank, which controls
approximately 12% of the nation’s credit card market, had not done
so.
While there have been several law enforcement actions combating
on-line casinos, Siptzer’s agreement with Citibank is the first
case to address financial entities that process gambling
transactions. In 1999, the Attorney General won a lawsuit charging
that an Antigua-based casino that accepted bets from New York
residents had violated New York’s gambling laws.
