Is I-Gaming within Biting Distance of the PATRIOT Act?

28 March 2002

The USA PATRIOT Act could present trouble for online gambling companies seeking licenses in Curacao.

Passed as a response to the terrorist attacks of Sept. 11, the act aims to help the government identify, prevent and put an end to money laundering that finances terrorism.

While Congress formulated legislation in the wake of the tragedy, a handful of representatives attempted to wrench prohibitive Internet gambling laws into the bundle of anti-terrorism proposals policymakers were considering. Those efforts, led by Rep. James Leach, R-Iowa, in The Unlawful Internet Gambling Funding Prohibition Act, were bypassed in the aftermath of the attacks so that anti-money laundering legislation could be approved immediately; debate on Internet gambling would have slowed the process.

At first, the I-gaming industry breathed a sigh of relief when Leach's bill was put aside--not only because it would have put their business in jeopardy, but also because it drew connections between terrorism and Internet gambling. However, the Patriot Act could have an impact in I-gaming by hurting the industry where it counts--its banking services.


The USA PATRIOT Act was passed by both houses of Congress in October. Its long name is the United and Strengthening American by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. According to a Congressional Research Service Report, the act gives federal law enforcement and intelligence officers increased authority to collect and share evidence, particularly regarding wire and electronic communications. It also amends money laundering rules, especially those having to do with overseas financial activities; creates new federal crimes; and stiffens the punishment for existing federal crimes and toughens immigration laws.

Pat O'Brien, an offshore gaming and banking lawyer in the Fort Lauderdale office of Greenberg Traurig LLP, said the act extends U.S. jurisdiction to all banks that have correspondent accounts in the United States. Overseas banks set up correspondent accounts in the United States because it gives them access to the Federal Reserve, which helps in clearing transactions from Americans.

The cause for worry among I-gaming companies, O'Brien said, is that the PATRIOT Act allows the U.S. Justice Department to seize the correspondent account of any offshore bank it believes is engaged in illegal activity--including housing the proceeds of an Internet gambling business.

"The United States can now obtain a pretrial restraining order freezing assets, including bank accounts, of defendants in U.S. civil actions, once process has been served on the foreign party," O'Brien said. "This means that the U.S. merely has to serve papers on a foreign bank and it can then freeze the foreign bank's correspondent account."

That could impact Internet gambling companies because offshore banks could start refusing to open new accounts with online gambling businesses for fear of having their correspondent account taken by the U.S. government. O'Brien said that if any offshore bank came to him for advice on how to operate in the climate of the PATRIOT Act, he'd say: "You risk seizure of your U.S. correspondent accounts, if you accept Internet gaming accounts, especially those involving sports books."

In addition, O'Brien said, the act requires foreign banks with correspondent accounts in the United States to identify someone in the United States to accept requests for information from the Treasury Department's Financial Crimes Enforcement Network.

"This means that serving the foreign bank only means serving an agent who must be appointed in the United States," O'Brien said.

The Curacao Connection

According to both O'Brien and Rob Vermeulen, managing director of E-Commerce Park, a server farm in Curacao, the reason the PATRIOT Act could have a particular impact in Curacao is that online casino operators must have a local bank account to get licensed by the government there.

The requirement helps the government familiarize itself with who is operating Internet gambling sites off of the island.

"(It) has everything to do with the fact that banks typically know their customers or at least know who sends them money and who the money goes back to," Vermeulen said. "So therefore, one of the requirements has been to have a local bank because then they would have a more comfortable feeling about who they are dealing with."

O'Brien said he has heard from industry insiders that it is increasingly difficult for an online gambling company to open an account with local banks in Curacao. Specifically, he said, the Central Bank of the Netherlands Antilles has "frowned" upon opening accounts within the gaming industry.

In his opinion, it's due to the PATRIOT Act. O'Brien said he recently heard that Giro Bank N.V. and ORCO Bank N.V. are the only two banks in Curacao that are accepting accounts from Internet gambling companies.

A representative from the Central Bank in Curacao declined to comment on the issue and referred IGN to the island's government. A staff member of the Netherlands Antilles Gaming Control Board, in turn, referred IGN to the Curacao Department of Justice, which did not respond to phone calls. The U.S. Treasury Department also did not respond to IGN's request for comment. PriceWaterHouseCoopers in Curacao declined to comment as well.

Is There a Problem?

Vermeulen, whose server farm houses the servers of online gaming companies, said he has not heard that the banks of the island, which has long been an offshore financial center, are presently refusing to open accounts for I-gaming companies.

"Curacao has always been a financial services environment, and I believe the banks here have been strict from day one," he said. "Therefore you will find very few banks that are doing business with gaming companies as we speak."

He said he does not necessarily think the U.S. government is wrong to take the approach the act takes. As for whether the PATRIOT Act will have a specific effect on the I-gaming industry, he said the Sept. 11 attacks "should be considered as affecting everybody's daily life."

"I don't necessarily think that the U.S. government is wrong," he said. "I think they are wrong in trying to blanket this other little spot on the sleeve, (but) it's more of a fragmentation bomb than a targeted approach. In general there's been much more caution and obviously there's been much less wealth lately, everywhere."

Anthony Dick, general manager and licensing administrator of Cyberluck Casino N.V., which received one of the four original master licenses from Curacao, said he is not aware of any change in attitude of the local banks.

"In our view," he said, "the administrative processes regarding any applicants attempting to be authorized to have an Internet gaming server here in Curacao remains unchanged from 1996."

However, not all site operators feel that way. An employee in the accounting department of an online casino based in Curacao said it has been hard for I-gaming companies to open new bank accounts lately. But whether it's due to the PATRIOT Act, he's not sure.

"But it's true," said the employee, who did not want his name printed. "There are very few banks--only one or two--that actually take them on this island. From what I understand they're not taking any new accounts right now."

He said it is getting more and more difficult to do business industry-wide, though, due to credit card transaction problems. As for whether Curacao's banks might stop doing business with I-gaming companies altogether, he said it's possible.

"If the U.S. government really turned the screws on them, they'd have to decide between doing business with us and doing business with the United States banks, and they'd probably decide to do business with the banks," he said. "It wouldn't really matter because if the banks in the States cut them off, they'd have to cut us off anyhow. I mean, the U.S. government wields a lot of power."

Whatever the extent of the impact the PATRIOT Act could have on online gambling companies in Curacao, O'Brien thinks the act has the potential to be a threat to I-gaming operations. Nevertheless, he believes the situation will change for the better, from the online gaming companies' perspective.

"There's two ways it can go--either the banks can start giving accounts or the regulators can change the regulation," he said. "I don't have any doubt one or the other will happen, because the regulators aren't building this big thing down there to then not give anybody a license."

Anne Lindner can be reached at