Financial Giant Joins Fight Against Online Gambling

Attorney General Spitzer today announced that the nation’s leading financial services company has agreed to block online gambling transactions with its credit cards. The move by Citibank, the nation’s largest credit card issuer, is expected to significantly reduce illegal internet gambling.

"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."

Under the agreement, Citibank will block transactions that are identified by casinos and web sites as online gambling. These transactions are particularly troublesome because internet gamblers can, and usually must, bet on credit. Such gamblers can drive themselves deep into debt and bankrupt their families, Spitzer said. Further, there is no effective way to prevent minors from gambling online, he said.

In New York, as in most states, the promotion of unauthorized betting and gambling is illegal -- whether it occurs online or off. However, Internet gambling businesses usually operate offshore in foreign locations, beyond the enforcement power of local authorities, so that they can avoid prosecution.

Noting that it is often difficult to prosecute online casinos operating in violation of New York and U.S. law, 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 several years, many large credit card issuers, such 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 percent of the nation’s credit card market, had not done so.

Spitzer commended Citibank for recognizing the role it can play in avoiding the harmful effects of online gambling, and called upon all credit card issuers and other payment systems to follow the lead of Citibank and other banks that block such transactions.

New York State Senator Frank Padavan: "As a sponsor of legislation to curtail gambling - including Internet gambling - I applaud the cooperation of Citibank, and hope that other credit card issuers will follow their lead in combating illegal Internet gambling. For too long financial services companies have looked the other way while the credit cards they issue have been used for illegal gambling activities. Online gambling often results in both consumer fraud and unconscionable consumer debt. As has been documented, online gambling by credit card represents one of the worst forms of ‘convenience’ gambling - its effects include destroyed lives and a loss in trust among consumers."

New York Council on Problem Gambling Executive Director James Maney: "Among the concerns voiced by those who treat problem gamblers is that Internet gambling is available to ‘anyone, 24 hours a day, anywhere.’ With Internet gambling there is no visual turning over of money. With a mere click of a mouse, bets can be wagered in the privacy of your own home or office. It is difficult to monitor these games. The computer doesn’t ask you for proof of age or have a security force checking your ID or encourage a break in play. Due to the gambler’s isolated behavior, it is easier to spin out of control. The Council encourages others to follow Citibank’s responsible action."

While there have been several law enforcement actions combating online casinos, the Attorney General’s agreement with Citibank is the first case to address financial entities that process gambling transactions. In 1999, for instance, 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.

The Attorney General’s agreement with Citibank reflects a growing effort by law enforcement and legislators to place obligations upon the financial systems through which illegal Internet transactions, such as gambling, occur. Several bills currently pending in the U.S. Congress would place new restrictions and criminal penalties on financial entities that facilitate such transactions. Spitzer warned that even under current law, however, the processing of known gambling transactions may lead to liability for facilitating or aiding and abetting the underlying activity, and may even render the transactions unenforceable.

In addition to imposing blocking mechanisms that will reject transactions coded as gambling, Citibank has agreed to make payments to organizations that combat compulsive gambling and aid those affected by it, and will pay $100,000 in costs to the State of New York.

The case was handled by Assistant Deputy Attorney General Dan Feldman, Assistant Attorney General Ken Dreifach in Charge of the Internet Bureau and Investigator Vanessa Ip.

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