House Committee Passes Money Laundering Measure

11 October 2001
A committee of the U.S. House of Representatives today approved an anti-money laundering bill that aims to ban Internet gambling.

The "Financial Anti-Terrorism Act of 2001" was passed 62-1 by the House Financial Services Committee. In response to the terrorist attacks of Sept. 11, the bill is intended to stem terrorists' cash flow.

The bill could be heard by the full House on Friday, Reuters reported. The Senate's version of the bill, which does not include provisions against Internet gambling, was passed by the Senate's Banking Committee last week. If each bill is approved by its respective legislative body, a conference will be held in which lawmakers attempt to cut and paste the two bills into one.

During the House committee's markup of the bill today, Rep. Michael Castle, R-Del., put forth an amendment to take the Internet gambling section out of the bill. His attempt failed by a 25-37 vote.

Section 303 of the bill bars an online gambling operator from accepting bank instruments including credit cards and electronic fund transfers as payment for Internet gambling. Penalties for breaking the proposed law range from a preliminary injunction to fines and up to five years in prison.

The rest of the bill would give the Treasury Department wide latitude to target foreign countries and banks it suspects of involvement in money laundering. The Treasury's new powers would include making U.S. banks keep detailed records of their dealings with foreign banks as well as the possibility of halting business with them.

The bill states that Internet gambling is a haven for money laundering. Bruce Zagaris, an expert on international money laundering, disagrees.

"Internet gaming is a form of entertainment, and it can be abused like many other vehicles in which money is transmitted, but for instance, assuming the industry has the safeguards that the Interactive Gaming Council has, then there should be no problem," said Zagaris, a lawyer with Berliner Corcoran & Rowe LLP in Washington, D.C. "To single out Internet gaming per se seems to be unwarranted, especially since it's legal in many parts of the world."

The inclusion of anti-Internet gambling language has caused some in the e-gaming industry to speculate that some legislators had motivations other than protection against terrorism when putting the bill together. The bill's Internet gambling section mirrors the language of a bill that Rep. James Leach, R-Iowa, introduced in February.

"Some members of the U.S. Congress and also the regulators and law enforcements have sometimes gone after Internet gambling just because they want to prohibit it," Zagaris said. "And so there's a tendency to single it out and make it a bogeyman."

The FBI has two pending cases involving Internet gambling as a vehicle for money laundering. Zagaris said that, while it's possible I-gaming could have been used for money laundering in the past, significant improvements have been made in regulating the industry.

He said both the United States and the United Kingdom had threatened to keep financial advisories in place against Antigua based on the perception that it had little control over money laundering because Internet gambling is legal there. However, Antigua was able to get its controls up the level where both countries lifted their advisories, Zagaris said.

Both Zagaris and a staff member from the Financial Services Committee said it's impossible to guess at this point whether the Internet gambling provisions will stick with the bill once it's married with the Senate's version.

"Unless the administration itself gets behind it, it will have difficulty, I think," Zagaris said. "On the other hand, the bill itself is definitely going to go through, so I wouldn't bet one way or the other right now."

Anne Lindner can be reached at