GAO Report Leverages Prohibition Efforts

6 December 2002

U.S. Policymakers in favor of banning Internet gambling are treating the General Accounting Office's recently released report on I-gaming as a recommendation for prohibition.

Despite numerous mentions throughout the 66-page document that the GAO is neither making recommendations nor drawing conclusions, the report appears to have given the prohibition camp momentum going into the new legislative session in January.

"We have control over how it is written, but after that anyone can put whatever spin they want on it."
- William Jenkins, Jr.
U.S. General Accounting Office

Sen. Harry Reid said just a day after the report was released that he'll make a law banning Internet gaming a priority when Congress reconvenes. Reid cited the report's suggestion that online gaming could become a haven for money laundering schemes as the basis of his new found urgency.

But according to report's chief author, no such conclusion was made.

"This is simply an informational report," said William Jenkins, Jr. the director of financial markets and community investment for the GAO.

Jenkins, a long-time GAO official, said he can't worry about how reports are used once they are in the public domain.

"Our goal is to produce an objective, fair and unbiased as possible report," he said. "We have control over how it is written, but after that anyone can put whatever spin they want on it."

Policymakers commissioned the GAO to study online gambling to help them assess how, or whether, they should address it through legislation.

To that end, Jenkins and his team attempted to produce an all-encompassing report that examines a wide range of topics.

The report covers state and federal laws that could pertain to Internet gambling as well as an international look at jurisdictions that have taken either a regulatory or prohibitive approach to the industry.

An entire section of the report is devoted to the various types of alternative payment solutions designed for the interactive gaming industry as well as explaining the foundation and basic workings of the traditional credit card system.

"There is little opposition in the House to our bill (the Leach bill), and I think this report will help spur the process in the next session."
- Scott Duncan
House Committee on Financial Services

Jenkins feels the GAO's objective was accomplished.

"There is a lot of information out there about Internet gambling," he said. "Instead of having to go to eight or 10 different places to get that information, we created one place to go and get a basic understanding of the industry."

Rep. Michael Oxley, R-Ohio, a long proponent of prohibiting Internet gambling, could use the report to spark the reintroduction of the Leach bill, which seeks to prohibit the transfer of funds for illegal Internet gambling.

Scott Duncan, a spokesman for the House Committee on Financial Services, which Oxley chairs, feels the report amplifies why I-gaming should be a top priority in the legislature.

"This shows the international scope of the industry and how susceptible it can be to money laundering," he said. "There is little opposition in the House to our bill (the Leach bill), and I think this report will help spur the process in the next session."

Conversely, the Interactive Gaming Council, a trade association for I-gaming companies, hopes the report will educate people on the intricacies of what some see as an "elaborate" industry and open them up to alternative ways of dealing with it.

"The GAO did a tremendous job of painting a clear picture of how this industry works," IGC Deputy Director Keith Furlong said. "I would hope that people would read the report as a whole and not take it out of context. We still feel that once people have a clear understanding of our industry, which they can get by reading this report, they will realize that regulation is the only viable alternative to legislating it, rather than prohibiting it."

Furlong finds it ironic that while law enforcement officials are always quick to say Internet gambling is a haven for money laundering, they also usually say there are very limited cases involving the industry because of a lack of regulation. If they want to effectively go after money launderers, he said, they could track them more easily if their business was legal and regulated.

Gaming lawyer Tony Cabot has long used the same argument.

"I think anybody who has been dealing in the area of money laundering understands the problems online gaming can, and probably will, create for law enforcement," he said. "If it remains illegal, it becomes a problem for everybody."

The volume, speed and international reach of Internet transactions, along with the offshore locations of Internet gambling sites, make Internet gambling especially vulnerable to money laundering, according to law enforcement officials cited in the GAO report.

Time will tell whether the report provides the boost needed by supporters of the Leach bill. Prohibition legislation has been passed twice in the Senate and once in the House, but no bill has made it out of both chambers.

Click here to download the complete GAO report.

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