Former Gaming Director for Antigua Addresses Ambiguous Media Report

24 July 2007

After a recent, highly ambiguous media report suggested that gaming companies in the Caribbean island nation of Antigua and Barbuda (Antigua), and other jurisdictions, were losing their gaming-related bank accounts under threat of U.S. law, questions arose as to the state of relations between Antiguan banks and gaming companies with the United States.

"Within the industry, there is a general problem getting and maintaining bank accounts," said Ron Maginley, former gaming director for Antigua, "but it is particularly a problem in Antigua where our banks are even more dependent upon corresponding banks because of the size, nature and importance of the offshore financial sector to the economies of Antigua."

Maginley explained that the banks in Antigua have received notices from their corresponding U.S. banks expressing concern over the country's tolerance of both gaming accounts and processing of gaming-related transactions through these accounts.

Maginley also said that the gaming companies that he maintains contact with admit that they are struggling to maintain existing--or, in some cases, obtain new--gaming-related bank accounts.

"This is not necessarily a new problem, but it is becoming more and more of an issue for local banks here," he said, acknowledging that pressure from offshore banks (U.S.-based banks) had increased noticeably since the U.S. Unlawful Internet Gambling Act (UIGEA) was enacted in October.

Moreover, Maginley said, the United States is pressuring banks in other I-gaming jurisdictions, such as the Isle of Man, where accounts are being frozen subject to the conclusion of ongoing investigation into money laundering activities and alleged gambling-related tax evasion.

For instance, Isle of Man-based Neteller, which settled on July 18 with the U.S. government for $136 million, was under federal investigation for seven months for conspiracy to conduct an illegal gambling business via illegal transfer of payments to and from U.S. residents.

The Federal Reserve Board and the Department of Treasury have passed the deadline prescribed for publishing the draft regulations for the UIGEA. In the meantime, the industry is waiting to see what the Fed will bring.

So far, Maginley said, the UIGEA has resulted in banks showing increasing reluctance to provide gaming services to companies because they are unable to determine if a transaction is U.S.-specific or whether a gaming company has adequate measures to restrict U.S. transactions.

With regard to money laundering, Maginley said that, in 1999, the Financial Action Task Force--an inter-governmental body formed to develop policies to combat money laundering--required gaming companies to be classified as financial institutions. Thus, gaming companies are, increasingly, held to higher standards in terms of know-your-customer, management and accounting,

Antigua has been embroiled in a well-documented World Trade Organization (WTO) dispute with the United States over U.S. restrictions on I-gaming. Through a series of appeals, Antigua has repeatedly emerged the victor. Nonetheless, the United States has refused to comply and bring its laws into line with international trade agreements. In May, the U.S. government announced that it would be withdrawing gambling from its commitments to the General Agreement on Trade in Services (GATS).

Maginley said that bank-account issues facing certain operators are not necessarily related to the WTO dispute, but he does believe the United States' latest position could open the industry to more prosecutions.

"Once the United States made the determination that they were going to rescind their provision to guarantee access to the U.S. market, the issue about the legality of Internet gaming sort of disappears, quite frankly, and leaves the U.S. position much clearer," Maginley said. "I think the only thing that was preventing attempts from the U.S. to aggressively pursue prosecutions against more gambling companies was this uncertainty about whether or not the laws were applicable.

"Antigua's WTO action, if anything, caused a pause," he continued, "because you had a conflict between what the law said and what the federal government said in terms of an international trade agreement under the WTO and the GATS. So, the lack of restriction was a pause. With the United States pulling out of [GATS] and Antigua and other countries saying they will settle for monetary compensation because of the loss of this market access, it leaves, I believe, the floor completely clear for the United States to insist that their position has been vindicated, that this is an unlawful commercial activity and they can, therefore, seek to enforce U.S. laws that currently stand."

Incidentally, Antigua said today that it had formally solicited the WTO to authorize $3.4 billion, annually, in commercial sanctions against the United States. On June 20, Antigua informed the Geneva-based trade referee of its intention to seek concessions, primarily through the suspension of its obligations regarding U.S. copyrights, trademarks, industrial designs and patents.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.