Exhibit AB-1 Antiguan Remote Gaming Revenue

Transcription

1 Exhibit AB-1

2 Exhibit AB-1 Antiguan Remote Gaming Revenue $2,500 Antiguan Remote Gaming Revenue $2,000 Remote Gaming Revenue (US$ Millions) $1,500 $1,000 $500 $ E 2008E 2009E 2010E 2011E 2012E Source: Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007.

3 Backup to Exhibit AB-1 Antiguan and Global Remote Gaming Revenue (US$ Millions) % Change of Antiguan Remote Gaming Revenue % Change of Global Remote Gaming Revenue Global Remote Gaming Revenue Excluding Antigua % Change of Global Remote Gaming Revenue Excluding Antigua Year Antiguan Remote Gaming Revenue Global Remote Gaming Revenue 1999 $546 n/a $1,043 n/a $497 n/a 2000 $1, % $2, % $1, % 2001 $2,392 39% $4,046 45% $1,654 53% 2002 $2,109-12% $5,140 27% $3,031 83% 2003 $1,416-33% $6,668 30% $5,252 73% 2004 $1,125-21% $9,121 37% $7,996 52% 2005 $1,138 1% $12,494 37% $11,356 42% 2006 $1,086-5% $14,983 20% $13,897 22% 2007E $948-13% $13,726-8% $12,779-8% 2008E $982 4% $16,932 23% $15,951 25% 2009E $1,015 3% $19,473 15% $18,458 16% 2010E $1,041 3% $21,326 10% $20,285 10% 2011E $1,068 3% $22,698 6% $21,630 7% 2012E $1,094 2% $24,070 6% $22,976 6% Source: Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007.

4 Exhibit AB-2

5 Exhibit AB-2 Antiguan Share of Global Remote Gaming Revenue 70% 60% Antiguan Share of Global Remote Gaming Revenue 50% Share of Global Remote Gaming Revenue 40% 30% 20% 10% 0% E 2008E 2009E 2010E 2011E 2012E Source: Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007.

6 Backup to Exhibit AB-2 Antiguan Share of Global Remote Gaming Revenue (US$ Millions) Year Antiguan Remote Gaming Revenue Global Remote Gaming Revenue Antiguan Share of Global Remote Gaming Revenue 1999 $546 $1,043 52% 2000 $1,716 $2,799 61% 2001 $2,392 $4,046 59% 2002 $2,109 $5,140 41% 2003 $1,416 $6,668 21% 2004 $1,125 $9,121 12% 2005 $1,138 $12,494 9% 2006 $1,086 $14,983 7% 2007E $948 $13,726 7% 2008E $982 $16,932 6% 2009E $1,015 $19,473 5% 2010E $1,041 $21,326 5% 2011E $1,068 $22,698 5% 2012E $1,094 $24,070 5% Source: Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007.

7 Exhibit AB-3

8 Exhibit AB-3 Trade Loss to Antigua (US$ Millions) Model 1: Constant Market Share Model Total 1 Annual Average Global Remote Gaming Revenue 2 $1,043 $2,799 $4,046 $5,140 $6,668 $9,121 $12,494 $14,983 $13,726 $16,932 $19,473 $21,326 $22,698 $24,070 Counterfactual Antiguan Share of Global Remote Gaming Revenue 3 52% 61% 59% 41% 21% 21% 21% 21% 21% 21% 21% 21% 21% 21% Counterfactual Antiguan Remote Gaming Revenue-Model 1 $546 $1,716 $2,392 $2,109 $1,416 $1,937 $2,653 $3,181 $2,914 $3,595 $4,134 $4,528 $4,819 $5,110 Actual Antiguan Remote Gaming Revenue 4 $546 $1,716 $2,392 $2,109 $1,416 $1,125 $1,138 $1,086 $948 $982 $1,015 $1,041 $1,068 $1,094 Lost Antiguan Remote Gaming Revenue - Model 1 $0 $0 $0 $0 $0 $812 $1,515 $2,095 $1,966 $2,613 $3,120 $3,486 $3,751 $4,016 Lost Antiguan Remote Gaming Revenue Beginning 4/4/ $0 $0 $0 $0 $0 $0 $0 $1,561 $1,966 $2,613 $3,120 $3,486 $3,751 $4,016 $20,515 $3,041 Output Multiplier Trade Loss to Antigua $0 $0 $0 $0 $0 $0 $0 $2,201 $2,773 $3,685 $4,399 $4,916 $5,289 $5,663 $28,926 $4,288 Present Value of Trade Loss to Antigua 7 $0 $0 $0 $0 $0 $0 $0 $2,380 $2,773 $3,369 $3,677 $3,757 $3,695 $3,617 $23,268 $3,450 Notes & Sources: 1. Losses are computed through 2012, the last year for which remote gaming revenue data exist. 2. Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May : Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007; : Held constant at 2003 market share. 4. Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May Losses are computed starting April 4, 2006, given that the end of the reasonable period for the U.S. to come into compliance with its GATS commitment to free trade in betting and gambling services was April 3, Due to the limited availability of data, the Output Multiplier is the tourism multiplier for Barbados, which is a small island Caribbean economy like Antigua. Source: Tourism Multipliers Explained, Horwath Tourism & Leisure Consulting, November Losses are converted from current values to the present value (as of mid-2007) using the mid-period convention and a discount rate of 9.38%, which is the median Weighted Average Cost of Capital (CAPM) for SIC Code 7999, which includes the gaming industry. Source: Ibbotson Cost of Capital 2006 Yearbook.

9 Exhibit AB-4

10 Exhibit AB-4 Trade Loss to Antigua (US$ Millions) Model 2: Constant Growth Rate Model Total 1 Annual Average Counterfactual Antiguan Remote Gaming Revenue - Model 2 2 $546 $1,716 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,601 $2,828 $3,075 $3,344 $3,636 $3,954 Actual Antiguan Remote Gaming Revenue 3 $546 $1,716 $2,392 $2,109 $1,416 $1,125 $1,138 $1,086 $948 $982 $1,015 $1,041 $1,068 $1,094 Lost Antiguan Online Gaming Revenue - Model 2 $0 $0 $0 $282 $976 $1,267 $1,254 $1,305 $1,653 $1,846 $2,060 $2,302 $2,568 $2,860 Lost Antiguan Remote Gaming Revenue Beginning 4/4/ $0 $0 $0 $0 $0 $0 $0 $973 $1,653 $1,846 $2,060 $2,302 $2,568 $2,860 $14,263 $2,114 Output Multiplier Trade Loss to Antigua $0 $0 $0 $0 $0 $0 $0 $1,372 $2,330 $2,603 $2,905 $3,246 $3,621 $4,032 $20,110 $2,981 Present Value of Trade Loss to Antigua 6 $0 $0 $0 $0 $0 $0 $0 $1,483 $2,330 $2,380 $2,428 $2,481 $2,530 $2,576 $16,208 $2,403 Notes & Sources: 1. Losses are computed through 2012, the last year for which remote gaming revenue data exist : Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007; : Held constant at 2001 value; : Increased by an annual growth rate of 8.7%, which is equal to the compound annual growth rate (CAGR) for global remote gaming revenue excluding Antigua (see backup to Exhibit AB-5). 3. Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May Losses are computed starting April 4, 2006, given that the end of the reasonable period for the U.S. to come into compliance with its GATS commitment to free trade in betting and gambling services was April 3, Due to the limited availability of data, the Output Multiplier is the tourism multiplier for Barbados, which is a small island Caribbean economy like Antigua. Source: Tourism Multipliers Explained, Horwath Tourism & Leisure Consulting, November Losses are converted from current values to the present value (as of mid-2007) using the mid-period convention and a discount rate of 9.38%, which is the median Weighted Average Cost of Capital (CAPM) for SIC Code 7999, which includes the gaming industry. Source: Ibbotson Cost of Capital 2006 Yearbook.

11 Backup to Exhibit AB Annual Growth Rate of Global Remote Gaming Revenue Excluding Antigua (US$ Millions) Year Global Remote Gaming Revenue Antiguan Remote Gaming Revenue Global Remote Gaming Revenue Excluding Antigua 1999 $1,043 $546 $ $2,799 $1,716 $1, $4,046 $2,392 $1, $5,140 $2,109 $3, $6,668 $1,416 $5, $9,121 $1,125 $7, $12,494 $1,138 $11, $14,983 $1,086 $13, E $13,726 $948 $12, E $16,932 $982 $15, E $19,473 $1,015 $18, E $21,326 $1,041 $20, E $22,698 $1,068 $21, E $24,070 $1,094 $22, CAGR 8.2% 0.1% 8.7% Source: Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May Note: CAGR equals the compound annual growth rate.

12 Exhibit AB-5

13 Exhibit AB-5 Trade Loss to Antigua (US$ Millions) Model 3: Fixed Revenue Model Total 1 Annual Average Counterfactual Antiguan Remote Gaming Revenue - Model 3 2 $546 $1,716 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 $2,392 Actual Antiguan Remote Gaming Revenue 3 $546 $1,716 $2,392 $2,109 $1,416 $1,125 $1,138 $1,086 $948 $982 $1,015 $1,041 $1,068 $1,094 Lost Antiguan Remote Gaming Revenue - Model 3 $0 $0 $0 $282 $976 $1,267 $1,254 $1,305 $1,444 $1,410 $1,377 $1,350 $1,324 $1,298 Lost Antiguan Remote Gaming Revenue Beginning 4/4/ $0 $0 $0 $0 $0 $0 $0 $973 $1,444 $1,410 $1,377 $1,350 $1,324 $1,298 $9,175 $1,360 Output Multiplier Trade Loss to Antigua $0 $0 $0 $0 $0 $0 $0 $1,372 $2,035 $1,988 $1,941 $1,904 $1,867 $1,829 $12,936 $1,918 Present Value of Trade Loss to Antigua 6 $0 $0 $0 $0 $0 $0 $0 $1,483 $2,035 $1,817 $1,623 $1,455 $1,304 $1,169 $10,886 $1,614 Notes & Sources: 1. Losses are computed through 2012, the last year for which remote gaming revenue data exist : Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May 2007; : Held constant at 2001 value. 3. Quarterly egaming Statistics Report, Global Betting and Gaming Consultants, May Losses are computed starting April 4, 2006, given that the end of the reasonable period for the U.S. to come into compliance with its GATS commitment to free trade in betting and gambling services was April 3, Due to the limited availability of data, the Output Multiplier is the tourism multiplier for Barbados, which is a small island Caribbean economy like Antigua. Source: Tourism Multipliers Explained, Horwath Tourism & Leisure Consulting, November Losses are converted from current values to the present value (as of mid-2007) using the mid-period convention and a discount rate of 9.38%, which is the median Weighted Average Cost of Capital (CAPM) for SIC Code 7999, which includes the gaming industry. Source: Ibbotson Cost of Capital 2006 Yearbook.

14 Exhibit AB-6

15 for the year ended 31 December 2005

16 E A S T E R N C A R I B B E A N C E N T R A L B A N K PARTICIPATING GOVERNMENTS Anguilla Antigua and Barbuda Dominica Grenada Montserrat St Kitts and Nevis Saint Lucia St Vincent and the Grenadines ADDRESS Headquarters: P O Box 89 Basseterre St Kitts and Nevis West Indies Cable: CENTRAL BANK, ST KITTS Telephone: (869) Facsimile: (869) statistics@eccb-centralbank.org / requests@eccb-centralbank.org Website:

17 FOREWORD The National Accounts Digest is an annual publication issued by the Eastern Caribbean Central Bank. It provides information about the volume of national income by economic activity and about expenditure on the gross domestic product, savings, per capita and other selected indicators for the member countries of the Eastern Caribbean Currency Union (ECCU). The report has been prepared in accordance with the standard methodology adopted for member countries that is broadly consistent with the recommendations of the United Nations System of National Accounts. This Digest provides for an analysis of both short term and medium term trends, as it covers the period 1997 to This series provides a consistent data set for the period under review and incorporates all the revisions made during the period due to changes in methodology and additional data received. As is customary, revisions will be made to the preliminary 2005 estimates as more information from the annual National Accounts Survey of Establishments becomes available. This digest is based on data available as at 30 September National accounts estimation depends on a large set of data gathered from administrative records and on specially designed surveys and censuses, all of which involve the participation of a myriad of persons and institutions. The ECCB takes this opportunity to thank all the business enterprises, institutions and individuals who provided information, especially those who completed and returned the national accounts questionnaires. We look forward to your continued support. The ECCB would like to express its gratitude to the staff of the national statistical offices who have contributed significantly in the collection of data and the production of these estimates on an annual basis over the years. 1

18 DEFINITION OF COMPONENTS OF THE ACCOUNTS AND RELATED AGGREGATES National accounts compilation is a statistical procedure which aims at providing a numerical summary of the many transactions taking place in an economy during a given period. These transactions relate, in particular, to the production and use of goods and services, to the generation and use of income and to the transfers of income or capital between sectors of the economy. The following notes, concepts and definitions are presented here in order to facilitate an understanding of the statistical tables presented in this publication. DEFINITION OF CONCEPTS OUTPUT Output measures the value of the goods and services produced within an establishment that become available for use outside that establishment. There are three types of output: (i) (ii) (iii) Market output Output for own final use Other non-market output (1) Market output consists of: (a) (b) (c) (d) (e) Products sold at economically significant prices Products bartered Products used for payments in kind (wages in kind etc.) Intra-company transfers of product (i.e. the value of goods and services supplied by one establishment to another within the same enterprise, to be used as intermediate inputs) Changes in inventories of work-inprogress and finished goods, referred to as stock investment (2) Output for own final use consists of: (a) (b) Own-account capital formation Households production of products for own final consumption Production of goods for own final consumption Services of paid domestic staff Services of owner-occupied dwellings (3) Other non-market output: Output that is provided free or at economically non-significant prices to other units. This includes most of the output of the government sector and non-profit institutions serving households (NPI). INTERMEDIATE CONSUMPTION This consists of non-durable goods and services purchased by producers and used up as inputs in the process of production. It does not include goods and services produced within the establishment and fed back as inputs into production within the same establishment. Nondurable goods are defined as goods having an expected lifetime of use of less than a year. Intermediate consumption goods are valued in purchaser s prices. In practice, intermediate consumption is estimated as the sum of purchases of inputs less changes in inventories of inputs. Problems sometimes arise in differentiating intermediate consumption from compensation of employees and gross capital formation. Some of these are elaborated as follows: 2

19 Intermediate Consumption 1. Tools or equipment used at work. 2. Specialised clothing used mainly at work. 3. Accommodation services at the place of work. 4. Transportation and hotel services provided for business. 5. Medical facilities provided because of the nature of work. Compensation of Employees 1. Durable goods used extensively away from work. 2. Uniforms that employees choose to wear extensively away from work. 3. Ordinary housing services provided to employees and their dependents. 4. Services of vehicles used away from work and transportation allowances. 5. Ordinary medical facilities provided to employees and their dependents. 6. Meals and drinks provided free of cost by employers. Intermediate Consumption 1. Recurrent expenditure on small durable producer goods, like hand tools, that are a small share of total expenditure on machinery and equipment. 2. Regular maintenance, repair of fixed assets and replacement of parts required to keep fixed assets in working order. 3. Research and development, staff training and market research are recorded as intermediate inputs though they may bring future benefits. 4. Weapons of destruction. Gross Fixed Capital Formation 1. Expenditure on hand tools if it is large compared to total expenditure on machinery and equipment. 2. Major renovation that is not dictated by the condition of the asset and enhances the efficiency or capacity of fixed assets. 3. Mineral exploration, computer software. 4. Expenditure on items that provide defence services, i.e. buildings, roads, and airfields. 5. Weapons, armoured vehicles etc. used for providing security services. 5. Weapons, armoured vehicles etc. to be used primarily to wage war. 3

20 VALUATION OF GOODS AND SERVICES Purchaser s price is the amount paid by the purchaser, excluding any deductible VAT or similar deductible tax, in order to take delivery of a unit of a good or service at the time and place required by the purchaser. It includes any transport charges paid separately by the purchaser to take delivery at the required time and place. Producer s price is the amount receivable by the producer for a unit of a good or service produced, less any VAT invoiced to the purchaser. It excludes any transport charges invoiced separately by the producer. Basic price is the amount receivable by the producer from the purchaser for a unit of a good or service produced, less any tax payable, plus any subsidy receivable on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer. VALUATION OF ITEMS USED IN COMPILING THE ACCOUNTS 1) Output is valued at producer s prices. 2) Intermediate consumption is valued at purchaser s prices. 3) Private and government final consumption expenditure are valued at purchaser s prices. Private final consumption expenditure has been estimated as the residual of the GDP after the deduction of a) net exports of goods and services; b) government final consumption expenditure and gross capital formation. 4) Gross capital formation consists of gross fixed capital formation and changes in inventories. Gross fixed capital formation and changes in inventories have been valued at purchaser s prices. Changes in inventories are measured by the value of the entries into inventories less the value of withdrawals and the value of any recurrent losses of goods held in inventories. 5) Imports are valued at f.o.b. (free on board) as in the balance of payment statistics. This consists of the c.i.f. price less the costs of transportation and insurance charges between the customs frontier of the exporting country and that of the importing country. 6) Exports are valued f.o.b., which is defined as the cost of the goods to the purchaser abroad including packing, inland transport, loading charges and all other costs occurring up to the point where goods are deposited on board the exporting vessel or aircraft. GROSS VALUE ADDED Gross value added is a measure of each producer s contribution to GDP. It is a measure of the increased or newly created value generated by the production process in question, gross of any capital used up in the production process. FINANCIAL INTERMEDIATION SERVICES INDIRECTLY MEASURED (FISIM) In computing the gross domestic product for the total economy, an adjustment is made for financial intermediation services indirectly measured (FISIM). FISIM is measured as the 4

21 total property income receivable by financial intermediaries minus their total interest payable, excluding the value of any property income receivable from the investment of their own funds, as such income does not arise from financial intermediation. FISIM must be recorded as being disposed of in one or more of the following ways as intermediate consumption by enterprises, as final consumption by households or as exports to non-residents. In practice, because of the difficulty in allocating this output among various recipients or users of the services, for which no explicit charges are made, we have continued to use the convention proposed in the 1968 version of the SNA whereby the whole of the output is recorded as intermediate consumption of a notional industry. GROSS VALUE ADDED AT BASIC PRICES This pertains to the value of all goods and services produced in an economy within a given time period of usually one year. It is equal to the sum of compensation of employees, consumption of fixed capital, taxes less subsidies on production and operating surplus. An over-riding consideration on measuring the value of a country s gross domestic product is that duplication must be avoided. Duplication is avoided by deducting from the output of each producing unit the value of the inputs of goods and services that it has received from other units, at home or abroad. GROSS DOMESTIC PRODUCT AT MARKET PRICES This is equal to the sum of the gross value added of all resident producers, plus taxes on imports, and all non-deductible VAT or similar taxes less subsidies. GROSS NATIONAL INCOME AT MARKET PRICES Gross national income at market prices is the value of the goods and services produced by the labour and capital supplied by residents of a country. It is derived by adding net income from the rest of the world to GDP at market prices. NET INCOME FROM THE REST OF THE WORLD This is defined as the sum of two major components - net compensation of employees, and net property and entrepreneurial income. Net compensation of employees covers the labour income for residents abroad and non-residents in the country. Net property and entrepreneurial income covers investment income from ownership of foreign financial claims such as interest and dividends. The entrepreneurial income of foreign investment in a country, i.e. profits and dividends could be remitted to foreign countries or left unremitted. The unremitted portion is always treated as reinvested earnings. LABOUR INCOME AND WORKERS REMITTANCES It should be noted that there is a distinction between those individuals whose earnings are to be classified as labour income (persons who are not residents of the economy where they work) and migrants (persons who have become residents of that economy by virtue of being expected to live there for a year or more). This distinction is often hard to make in practice. Data for these items are generally obtained from the balance of payments accounts, where migrants income is classified as workers 5

22 remittances under current transfers and labour income is classified as compensation of employees in the income account. NATIONAL ACCOUNTS AT CONSTANT PRICES For analytical purposes, the national accounts at constant prices are derived by breaking current values down into a price component and quantity component. Estimates at constant prices are usually derived by deflating the current values by price indices or by extrapolating base year values by appropriate volume indices. Both are equivalent to expressing current period quantities at base period prices. METHODOLOGY OF ESTIMATING GROSS DOMESTIC PRODUCT The value added can be estimated by three different approaches, which are generally called the production approach, the income approach and the expenditure approach. The production approach is designed to evaluate the value of output. The value added is estimated by deducting intermediate consumption from the value of output. The production approach is useful for estimation of value added for the commodity producing sectors, viz, agriculture, livestock, forestry, fishing and mining. The income approach is used to estimate the value added by aggregating compensation of employees, taxes less subsidies on production, operating surplus and consumption of fixed capital. This approach is most commonly used in the case of service sectors, since data on gross output and intermediate consumption in the service sectors may not be readily available. The expenditure approach is used to estimate the gross domestic product according to categories of final use. This consists of estimates of expenditure of households final consumption, consumption expenditure of government, private non-profit services serving households and gross capital formation adjusted for imports and exports of goods and services. COMPENSATION OF EMPLOYEES This is defined to include all payments by resident producers of wages and salaries to their employees in cash and in kind, and of contributions, paid or imputed in respect of their employees, to social security schemes and to private pensions, family allowance, casualty insurance, life insurance and similar schemes. Wages and Salaries This is defined to include all payments that employees receive in respect of their work whether in cash or in kind, and before deductions to social security, income tax, etc. Included are: a) Commissions, overtime payments b) Tips c) Bonuses d) Cost-of-living allowances e) Fees to ministers of religion f) Fees to board directors g) Holiday and paid vacation or sick leave. Also included is the cost to the employer of providing food, lodging, ordinary clothing etc. either free of cost or at a markedly reduced cost that is of clear and direct benefit to the employees as consumers. 6

23 Excluded from wages and salaries is expenditure by employers which is of benefit to both the employees and employers. Examples of these are outlays on: a) Medical examinations b) Sporting and other recreational facilities c) Amenities at place of work d) Reimbursement of expenses for travel and entertainment e) Reimbursement of expenses or provision of uniforms, tools and equipment. Employer s contribution to Social Security Schemes This is the amount payable by employers to social security schemes for the benefit of their employees. Employer s contribution to Private Pension Funds and other pensions This is defined as contributions to private funds, reserves or other special schemes in respect of family allowances, lay-off and severance pay, casualties and maternity leave and pensions. The System of National Accounts (SNA) states that if in the absence of special schemes of reserves, employers make direct payments of this type to their employees, imputed contributions in respect of these obligations should be included in the employer s contribution to private schemes. OPERATING SURPLUS OR MIXED INCOME This is equivalent to the excess of value added at the producers prices over the sum of compensation of the employees, taxes less subsidies on production and imports and allowances for the consumption of fixed capital. If a strict income approach to estimation value added is used, operating surplus is estimated directly and value added is estimated as the sum of its elements. If a combination of the production and income approaches to estimation is used, value added is computed as the difference between gross output and intermediate consumption and operating surplus is calculated as the residual between value added and its other components. Operating surplus is simply the sum of net profits and property income. It is the surplus or deficit from production before taking into account interest and land rents payable by the establishment, as any non-allowable items such as bad debts, donations, miscellaneous provisions and capital items written off as current expense. Mixed income is similarly defined but contains an element of remuneration for the work done by the owners and households of unincorporated businesses. When estimates of the operating surplus of establishments are derived from data on profits shown in the accounts of enterprises, care has to be taken to adjust these data, as necessary, to the national accounts definition. If the figures from the accounts of enterprises relate to profits before taxes, it is necessary to adjust them to remove property incomes, transfers paid and received and capital gains and losses reflected in the figures. CONSUMPTION OF FIXED CAPITAL This is defined as the value at current replacement cost of the reproducible fixed assets used up during a period of account as a result of normal wear and tear, consistency and the normal rate of accidental damage. However, unforeseen obsolescence, major catastrophes and the depletion of natural resources are not included in consumption of fixed capital. 7

24 TAXES ON PRODUCTION AND IMPORTS These are defined as compulsory, unrequited payments to government, which industries treat as part of the cost of production. The SNA 93 no longer uses the term indirect taxes. Indirect taxes have been renamed taxes on production and imports. They do not include direct taxes on the income or wealth of enterprises. Taxes on production and imports consist of the following two groups: Taxes on Products Tax usually payable per unit of specific goods and services i) Production tax/excise duties: Include excise duties on rum, beer, cigarettes and soft drinks ii) iii) Taxes on exports Other taxes on products: Other taxes on specific goods and services, e.g. hotel occupancy tax and entertainment tax. Other Taxes on Production Taxes that establishments incur as a result of engaging in production but which are not directly tied to specific goods and services. i) Property taxes ii) Business and professional licences iii) Other taxes and licences: Include stamp duties, vehicle taxes and licences. SUBSIDIES These are grants on the current account made by government to private industries and public corporations. They also comprise grants made by the public authorities to government enterprises in compensation for operating losses when these losses are clearly the consequences of the policy of the government to maintain prices at a level below cost of production. Any government grants to producers which are not connected with their productive activities but are given to them in the capacity of customers, such as social assistance grants and social security benefits, should be treated as current transfers and not as subsidies. GOVERNMENT FINAL CONSUMPTION This is defined as the gross output of producers of government services less the value of its commodity and non-commodity sales and the value of its own-account capital formation. The gross output is equal to the cost of production, that is, the sum of the intermediate consumption of goods and services, compensation of employees, consumption of fixed capital and corresponding net taxes on production. The government s final consumption expenditure consists therefore of the purchases of goods and services and expenditure on compensation of employees, less the revenue received from sales. Sales do not include fees and charges levied by governments for regulatory purposes. Examples are payments of driving tests, vehicle licences, driving permits, dog licences, passports, airport fees and fees charged for court services, all of which are defined as fees when paid by households and as taxes on production when paid by enterprises. Fines and penalties are also excluded from sales and classified as fines and penalties whether paid by households or enterprises. These items are not to be deducted from gross output to arrive at final consumption expenditure. 8

25 PRIVATE FINAL CONSUMPTION EXPENDITURE This is defined as the outlays of households on new durable and non-durable goods and services less their net sales of second-hand goods, scraps and waste. Purchases of dwellings are treated as gross fixed capital formation of the real estate industry. The imputed rent of owneroccupied dwellings is part of the gross output of the real estate industry and is also included in the final consumption expenditure of households. Two main concepts of final consumption expenditure of households are applied in the SNA, namely final consumption expenditure of households in the domestic market and final consumption expenditure of resident households. The former concept relates to the expenditure of all household residents as well as non-residents, in the domestic territory of a country. This concept is arrived at first in the process of estimation; it is also the concept of household consumption expenditure, which is classified according to type and object of expenditure. Final consumption expenditure of residents is derived from final consumption expenditure of households in the domestic market by adding the direct purchases resident households make abroad and deducting the purchases non-resident households make in the domestic market. Direct purchases of resident households abroad and by non-resident households in the domestic market cover expenditure by individuals such as diplomats and military personnel and by individuals who visit foreign countries as tourists, seasonal or border workers for a period of less than one year. Outlays of individuals who are travelling on business and whose expenses are reimbursed by their employers should not be included, as they are part of the intermediate consumption expenditure of the employers. GROSS FIXED CAPITAL FORMATION This consists of additions to the assets of producers of tangible reproducible goods that have an expected lifetime of use of one year or more. The producers in question may be industries, producers of government service and producers of private nonprofit services to households. The capital goods may be purchased or produced on own account. Sales less purchases of second-hand fixed assets and sales of scrapped fixed assets by producers should be deducted from gross fixed capital formation. Gross fixed capital formation covers the following items: (i) (ii) Acquisitions by producers for civilian use of tangible assets which have an estimated lifetime of use of one year or more, except land, mineral deposits, timber tracts and similar non-reproducible tangible assets. Relatively inexpensive durable reproducible goods, such as certain types of office equipment, may on practical grounds be excluded. Government outlays on construction machinery and durable equipment primarily intended for military use are classified as intermediate consumption rather than gross fixed capital formation. Outlays on improvements and alterations of capital goods that significantly extend their expected lifetime of use or substantially increase their productivity are considered to be gross fixed capital formation. (iii) Outlays on the reclamation and improvement of land, on the development and extension of timber tracts, mines, plantations, orchards, and similar agricultural holdings are included in gross fixed capital formation. 9

26 (iv) Purchases and breeding of draught animals, breeding stock, dairy cattle and sheep and other animals raised for wool and hair clips should be treated as acquisitions of fixed assets. In practice, the closest feasible approximation may be the difference between the levels of these stocks at the beginning and the end of the period, both valued at approximate average prices ruling over the period. (v) Dealers margins, solicitors fees, stamp duties and other transfer costs of transactions in land, mineral deposits, timber tracts and similar non-reproducible assets in tangible non-financial assets and in second-hand assets are covered in gross capital formation. CHANGES IN INVENTORIES This is equal in principle to the market value at the owning establishment of the physical change during a period of account, in stocks of materials, supplies, work-in-progress except on construction projects, finished products, livestock raised for slaughter and merchandise held by resident industries and in stock of strategic materials and emergency stocks of important products held by government services. EXPORTS AND IMPORTS OF GOODS AND NON-FACTOR SERVICES This consists of the transactions in goods and services of the residents of a given country with the rest of the world, and covers merchandise, transportation, travel, insurance and other non-factor services, such as government transactions, various fees, rentals, royalties and gifts in kind. Military equipment transferred between governments may, however, go unrecorded. Expenditure abroad by residents such as tourists and other persons, seasonal workers and diplomatic and military personnel stationed abroad are treated as imports. Similarly, expenditures in the domestic territory by non-residents are considered exports. The valuation of exports and imports is f.o.b. 10

27 SUMMARY OF ECONOMIC PERFORMANCE OF THE MEMBER TERRITORIES OF THE EASTERN CARIBBEAN CENTRAL BANK IN 2005 INTRODUCTION Economic activity in the Eastern Caribbean Currency Union (ECCU) strengthened in Real GDP is estimated to have increased by 5.8 per cent, compared with growth of 4.1 per cent in The expansion in 2005 was underpinned by a sharp increase in public and private sector construction activity, partly associated with preparations for Cricket World Cup (CWC) 2007 in some of the member countries and reconstruction of buildings in Grenada in the aftermath of Hurricane Ivan in September Four member countries experienced growth rates in real GDP in excess of 5.0 per cent Grenada (12.1 per cent), Anguilla (10.9 per cent), Saint Lucia (5.8 per cent) and Antigua and Barbuda (5.3 per cent). Of the other member countries, St Kitts and Nevis experienced growth of 4.1 per cent, Dominica 3.4 per cent, St Vincent and the Grenadines, 2.2 per cent and Montserrat 1.6 per cent. ECCB MEMBER TERRITORIES ANNUAL PERCENTAGE RATE OF GROWTH OF GDP: (Current and Constant Prices) (%) (Years) Current Constant GDP BY EXPENDITURE The gross domestic product for the ECCU, in current market prices, increased by 8.9 per cent from $8,998m in 2004 to $9,795m in (See Table 2). Total consumption expenditure increased by 10.0 per cent to $7,781m during 2005, reflecting the largest increase during the period 1997 to Growth in private final consumption was also substantial, 11.7 per cent in 2005, associated with the expansion in economic activity and an increase in the value of imports of consumer goods in the currency union. Government final consumption expenditure increased by 5.0 per cent to $1,863m in This was partly due to wage and salary increases awarded to civil servants in Anguilla (10 per cent), Montserrat (10 per cent), Grenada (4.5 per cent) and St Vincent and the Grenadines (3.0 per cent). Growth in outlays on goods and services, partly resulted from higher fuel costs. The replacement of items damaged during the hurricane in Grenada also contributed to the increase in government consumption expenditure. Gross capital formation, which contributed 42.3 per cent of GDP in 2005, increased by 25.7 per cent. The expansion was underpinned by ongoing robust construction activity in some of the member countries, stemming from public sector infrastructural upgrading in preparation to host CWC 2007 in four of the member countries, increased foreign direct investment in hotel and other tourism related projects, particularly in Anguilla, Antigua and Barbuda, and Saint Lucia, and private sector residential development. 11

28 Table 1 GDP in Constant Prices (EC$M) % Change Country Anguilla Antigua & Barbuda Dominica Grenada (6.90) Montserrat St Kitts & Nevis Saint Lucia St Vincent & the Grenadines Total Table 2 Expenditure on GDP in Current Prices (EC$ M) Country Total Consumption Gross Capital Formation Goods and Non-Factor Services GDP at Market Prices % Change , , , , (1,371.31) (2,130.27) , , Exports of goods and services declined by 1.0 per cent, reflecting the weak performance of the ECCU s main agricultural and commodity exports, and the decline in visitor arrivals to the currency union. Payments for imports (f.o.b) were estimated at $4,865m, roughly 12.5 per cent above the total recorded in The growth in the value of imports was partly attributed to the rise in international oil prices and an increase in building material supplies in line with the expansion in construction activity. Import payments increased in all the member countries, with the largest rate recorded for Anguilla (26.7 per cent) followed by Grenada (18.6 per cent). SECTORAL ANALYSIS CONSTRUCTION Value added for construction, which accounted for 12.6 per cent of GDP, is estimated to have increased by 20.4 per cent, well above the 4.9 per cent rate recorded in 2004 and the strongest growth registered in the last 25 years. Both the private and public sectors provided the impetus to growth in construction. Private sector activity focussed on hotels, villas, golf courses, and residential and commercial buildings. Major public sector projects included upgrading roads and other infrastructure development, building repairs, airport expansion, stadia for CWC 2007 and low-income housing. Of the member countries, the increase in value added for construction was largest for Grenada (91 per cent), mainly as a result of post-hurricane reconstruction activity. Growth was also strong in both Saint Lucia and Antigua and Barbuda, driven by hotel expansions and preparations for CWC However, in Montserrat activity declined, due in part to the completion of major public sector projects including the airport development project. TOURISM Value added in the hotel and restaurant sector, an indicator of the level of tourism activity, grew by an estimated 0.2 per cent, a substantially reduced rate compared with the increase of 6.6 per cent in

29 The decline in the rate of growth was largely attributed to a weak performance in Grenada, as some hotels were closed for renovation in the aftermath of the hurricane. In addition, value added declined marginally in Antigua and Barbuda; in the previous year that country benefited from hosting the third cricket test match between England and the West Indies. Those declines were more than offset by increases, particularly in Anguilla, St. Vincent and the Grenadines, Saint Lucia and St Kitts and Nevis. In the rest of the tourism industry, activity in the cruise category contracted by 11.7 per cent in contrast to 2004 when strong growth in cruise ship passenger arrivals was recorded, partly as a result of visits by major cruise ships, particularly Queen Mary II, the world s largest cruise ship. MANUFACTURING The manufacturing sector, which contributed 5.8 per cent of real GDP, is estimated to have expanded by 6.1 per cent, compared to a slight increase of 0.5 per cent in Manufacturing activity increased in all member states, with Grenada registering an increase of 18.8 per cent, mainly driven by an expansion in output of flour, paint and toilet paper. In the rest of the ECCU, growth in output was recorded for dental cream, dishwashing liquid, beverages and beer production in Dominica, and rice, feed and beverage production in St Vincent and the Grenadines. In Saint Lucia, production of food, beverage and tobacco increased, while output of textiles, wearing apparel, corrugated paper and containers declined. include the lingering effects of hurricane damage to banana crops in Grenada, Saint Lucia and St Vincent and the Grenadines, leaf spot disease in Saint Lucia and abandonment of banana plots by some farmers due to uncertainty facing the industry. The available data on other agricultural crops indicate that output of nutmeg and cocoa in Grenada decreased sharply, attributed to the hurricane. Production of sugar cane in St Kitts and Nevis fell by 15.7 per cent, partly as a result of a decline in acreage under cultivation and unfavourable weather. OTHER SERVICES In other services, expansions in value added were recorded in communications (11.9 per cent) as the sector benefited from aggressive marketing as new telecommunications companies started operations in The expansion in construction activity in the ECCU contributed to increases in value added for the wholesale and retail trade (8.4 per cent) and transport (3.7 per cent) sectors. The growth in value added for banks and insurance (4.8 per cent) was supported in part by strong bank lending. The communication, wholesale and retail trade, transport and banks and insurance sectors, together accounted for approximately 46 per cent of real GDP. AGRICULTURE Output in the agricultural sector, which contributed 5.4 per cent of real GDP, is estimated to have declined by 11.7 per cent, following growth of 0.01 per cent in The decrease was largely the result of a 24.0 per cent fall in banana production to 59,400 tonnes, reflecting a combination of factors. These 13

30 Table 3 Contribution of Hotels and Restaurants and Construction to GVA in Constant Basic Prices (EC$M) Country Hotels and Restaurants Construction Anguilla Antigua and Barbuda Dominica Grenada Montserrat St Kitts and Nevis Saint Lucia St Vincent and The Grenadines Total % Contribution to GDP % Change Table 4 Contribution of Agriculture and Manufacturing to GVA in Constant Basic Prices (EC$M) Country Agriculture Manufacturing Anguilla Antigua and Barbuda Dominica Grenada Montserrat St Kitts and Nevis Saint Lucia St Vincent and The Grenadines Total % Contribution to GDP % Change

31 PROSPECTS Real GDP is projected to increase by 6.8 per cent in 2006, up from an estimated 5.8 per cent in This outlook is based on vibrant construction activity in some member countries associated with public sector upgrading of infrastructure in preparation for CWC 2007, and with private sector investment in residential housing, as well as in hotel and other tourism related projects. The expansion in construction is expected to have a positive impact on the wholesale and retail trade, mining and quarrying, transport, and electricity and water services sectors. Growth is projected for most member countries at rates ranging from 1.3 per cent in Grenada to 12.1 per cent in Antigua and Barbuda. In Montserrat, real GDP is projected to decline by 3.1 per cent, as major pubic sector projects were completed in early 2005 (chart 2). Chart 2 Forecast Real GDP Growth Rate 2006 Tourism performance is likely to improve, based on growth in stay-over arrivals as a result of increased airlift, new marketing strategies, hosting of pre-cwc 2007 games, the reopening of some hotels, particularly in Grenada, and favourable economic conditions in the global economy. Value added in the hotel and restaurant sector is projected to expand by 7.4 per cent The declining trend observed in cruise ship visitor arrivals in 2005 is likely to continue in 2006, based on first quarter performance and increased competition from US homeland ports. An improvement in real value added is projected for the agricultural sector with modest growth forecasted at 3.0 per cent. This improvement will be facilitated by higher banana production in all banana producing member countries and increased crop production in Grenada. However, a decline in real value added is projected for St. Kitts and Nevis due to the closure of the sugar industry. % (2.00) (4.00) Antigua & Barbuda Anguilla Dominica Grenada St Kitts and Nevis St Vincent and the ECCU Grenadines Saint Lucia Montserrat Economic activity in the manufacturing sector is projected to increase in 2006, fuelled mainly by higher domestic and external demand in most of the ECCU territories. Despite the growth experienced by other member countries such as St Kitts and Nevis and St Vincent and the Grenadines, real value added is projected to decline for Dominica, which faces competition from regional and international producers. Growth in value added for this sector is projected at 4.2 per cent Construction activity is expected to be robust in Growth in value added for that sector is projected at 14.6 per cent, and is expected to be buoyed by ongoing activities in both the private and public sectors leading up to Cricket World Cup Those activities include building and renovating stadia in some member countries, upgrading airports, rehabilitating roads, building hotels and other tourismrelated facilities and investing in residential housing. Activity in the sector is also likely to be boosted by increased residential construction as households take advantage of mortgage packages offered by commercial banks. Increased economic activity is expected in all other sectors of the economy, particularly in mining and quarrying, wholesale and retail, electricity and water, transportation, as well as business and other services, on account of growth in construction and hotels and restaurants. Downside Risks Despite the expansion projected for 2006, the currency union is faced with many challenges which may hinder growth. The main downside risks include rising oil prices on the global market, which would 15

32 lead to higher import payments and increases in air fares which may result in the reduction of visitor arrivals. Increasing geopolitical tensions on the international scene could also adversely affect stay over arrivals to the ECCU. Another downside risk includes the development of interest rate markets in the USA and the potential effect on our real effective exchange rate and the competitiveness of our goods and services. 16

33 SECTION 3 ANTIGUA AND BARBUDA

34 Table 3.1 Antigua and Barbuda GROSS DOMESTIC PRODUCT BY ECONOMIC ACTIVITY IN CURRENT PRICES (EC$M) R 2005 P Agriculture Crops Livestock Forestry Fishing Mining & Quarrying Manufacturing Electricity & Water Electricity Water Construction Wholesale & Retail Trade Hotels & Restaurants Transportation Road Transport Sea Transport Air Transport Communications Banks & Insurance Banks Insurance Real Estate & Housing Government Services Other Services Less: FISIM GVA in Basic Prices 1, , , , , , , , , Growth Rate Plus: Product Taxes less Subsidies GDP in Market Prices 1, , , , , , , , , Growth Rate SOURCE: CSO, ECCB Chart 3.1 % Nominal GVA Growth Rate

35 Table 3.2 Antigua and Barbuda GROSS DOMESTIC PRODUCT BY ECONOMIC ACTIVITY IN CONSTANT (1990) PRICES (EC$M) R 2005 R Agriculture Crops Livestock Forestry Fishing Mining & Quarrying Manufacturing Electricity & Water Electricity Water Construction Wholesale & Retail Trade Hotels & Restaurants Transportation Road Transport Sea Transport Air Transport Communications Banks & Insurance Banks Insurance Real Estate & Housing Government Services Other Services Less: FISIM GVA in Basic Prices 1, , , , , , , , , Growth Rate Plus: Product Taxes less Subsidies GDP in Market Prices 1, , , , , , , , , Growth Rate SOURCE: CSO, ECCB Chart 3.2 % Real GVA Growth Rate

36 Table 3.3 Antigua and Barbuda PERCENTAGE CONTRIBUTION OF GVA BY ECONOMIC ACTIVITY IN CURRENT PRICES R 2005 P Agriculture Crops Livestock Forestry Fishing Mining & Quarrying Manufacturing Electricity & Water Electricity Water Construction Wholesale & Retail Trade Hotels & Restaurants Transportation Road Transport Sea Transport Air Transport Communications Banks & Insurance Banks Insurance Real Estate & Housing Government Services Other Services Less: FISIM TOTAL SOURCE: CSO, ECCB Chart 3.3 % 25.0 Sectoral Contribution to GVA Current Prices Agriculture Manufacturing Wholesale and Retail Hotels and Restaurants Banks and Insurance Government Services Construction Transport and Communications All Other Sectors 55

37 Table 3.4 Antigua and Barbuda PERCENTAGE CONTRIBUTION OF GVA BY ECONOMIC ACTIVITY IN CONSTANT PRICES R 2005 P Agriculture Crops Livestock Forestry Fishing Mining & Quarrying Manufacturing Electricity & Water Electricity Water Construction Wholesale & Retail Trade Hotels & Restaurants Transportation Road Transport Sea Transport Air Transport Communications Banks & Insurance Banks Insurance Real Estate & Housing Government Services Other Services Less: FISIM TOTAL SOURCE: CSO, ECCB Chart 3.4 % 25.0 Sectoral Contribution to GVA Constant Prices Agriculture Manufacturing Wholesale and Retail Hotels and Restaurants Banks and Insurance Government Services Construction Transport and Communications All Other Sectors 56

38 Table 3.5 Antigua and Barbuda RATE OF GROWTH OF GROSS VALUE ADDED BY ECONOMIC ACTIVITY IN CURRENT PRICES R 2005 P Agriculture Crops (2.00) Livestock Forestry 3.49 (1.12) Fishing Mining & Quarrying (12.51) Manufacturing (1.65) 0.89 Electricity & Water 9.47 (12.96) (1.88) (18.11) (1.58) Electricity 1.28 (11.00) (20.05) (0.76) Water (28.27) (38.76) (10.66) Construction Wholesale & Retail Trade (0.54) (0.95) Hotels & Restaurants 5.71 (2.23) 4.75 (0.57) (7.84) (4.43) Transportation (0.06) Road Transport (2.67) (7.08) Sea Transport (0.31) (4.86) (3.35) (4.82) (7.67) Air Transport (0.63) Communications (3.23) Banks & Insurance (0.42) 4.27 (1.34) (1.60) Banks (7.55) (2.87) Insurance (15.61) Real Estate & Housing Government Services Other Services Less: FISIM (15.76) TOTAL SOURCE: CSO, ECCB Chart 3.5 % Nominal GVA Growth Rate

39 Table 3.6 Antigua and Barbuda RATE OF GROWTH OF GROSS VALUE ADDED BY ECONOMIC ACTIVITY IN CONSTANT PRICES R 2005 P Agriculture (0.07) Crops (2.02) Livestock Forestry - (2.47) Fishing Mining & Quarrying (12.49) Manufacturing (4.02) 0.88 Electricity & Water (2.68) Electricity (0.75) Water 5.90 (2.79) (11.45) (10.72) Construction Wholesale & Retail Trade (2.00) (2.76) Hotels & Restaurants 5.71 (2.24) 2.70 (0.93) (7.84) (1.09) Transportation (3.69) (3.28) (1.51) Road Transport (2.67) (7.08) Sea Transport (0.32) (4.85) (3.37) (4.78) (7.67) Air Transport 5.11 (3.97) 1.41 (0.72) (5.31) (3.11) Communications (1.22) Banks & Insurance (5.95) (2.28) Banks (7.55) (2.87) Insurance (22.27) Real Estate & Housing Government Services Other Services Less: FISIM (15.76) TOTAL SOURCE: CSO, ECCB Chart 3.6 % Real GVA Growth Rate

40 Table 3.7 Antigua and Barbuda GROSS VALUE ADDED DEFLATORS BY ECONOMIC ACTIVITY R 2005 R Agriculture Crops Livestock Forestry Fishing Mining & Quarrying Manufacturing Electricity & Water Electricity Water Construction Wholesale & Retail Trade Hotels & Restaurants Transportation Road Transport Sea Transport Air Transport Communications Banks & Insurance Banks Insurance Real Estate & Housing Government Services Other Services Less: FISIM TOTAL SOURCE: CSO, ECCB Chart Trend of the Deflator (1990 = 100)

41 Table 3.8 Antigua and Barbuda EXPENDITURE ON GROSS DOMESTIC PRODUCT IN CURRENT PRICES (EC$M) R 2000 R 2001 R 2002 R 2003 R 2004 R 2005 P TOTAL CONSUMPTION 1, , , , , , , , , Private General Government GROSS CAPITAL FORMATION , , , Gross Fixed Capital Formation , , , Changes in Inventories GOODS & NON-FACTOR SERVICES (94.50) (64.86) (152.53) (85.32) (131.96) (198.11) (207.87) (125.42) (275.44) Exports of Goods Exports of NFS 1, , , , , , , , , Imports of Goods , , Imports of NFS GDP AT MARKET PRICES 1, , , , , , , , , less Taxes on Production and Imports add Subsidies GVA AT BASIC PRICES 1, , , , , , , , , SOURCE: CSO, ECCB Table 3.9 Antigua and Barbuda NATIONAL ACCOUNTS AGGREGATES IN CURRENT PRICES (EC$M) R 2000 R 2001 R 2002 R 2003 R 2004 R 2005 P GVA AT BASIC PRICES 1, , , , , , , , , Taxes on Production and Imports Less Subsidies GDP AT MARKET PRICES 1, , , , , , , , , Net Income from Abroad (59.82) (56.80) (63.30) (120.20) (66.93) (111.91) (104.16) (122.56) (112.78) GROSS NATIONAL INCOME 1, , , , , , , , , Net Current Transfers from Abroad (4.62) GROSS NATIONAL DISPOSABLE INCOME 1, , , , , , , , , Private Final Consumption Government Final Consumption Total Consumption 1, , , , , , , , , GROSS NATIONAL SAVING , Gross Capital Formation , , , Gross National Saving , FOREIGN SAVING SOURCE: CSO, ECCB 60

42 Table 3.10 Antigua and Barbuda SELECTED ECONOMIC INDICATORS UNIT R R 2002 R 2003 R 2004 R 2005 P CURRENT PRICES GVA at Basic Prices EC$M 1, , , , , , , , , GDP at Market Prices EC$M 1, , , , , , , , , GNI at Market Prices EC$M 1, , , , , , , , , Per Capita GVA at Basic Prices EC$ 19,101 20,240 21,144 21,517 21,073 21,092 21,665 22,646 23,802 Per Capita GDP at Market Prices EC$ 22,726 23,962 24,840 24,842 24,489 24,635 25,529 27,193 28,385 Per Capita GNI at Market Prices EC$ 21,858 23,149 23,946 23,179 23,618 23,207 24,223 25,685 27,127 CONSTANT 1990 PRICES GVA at Basic Prices EC$M 1, , , , , , , , , GDP at Market Prices EC$M 1, , , , , , , , , GNI at Market Prices EC$M 1, , , , , , , , , Per Capita GVA at Basic Prices EC$ 15,956 16,508 17,080 17,284 16,505 16,529 16,926 17,483 18,075 Per Capita GDP at Market Prices EC$ 18,984 19,544 20,066 19,954 19,180 19,306 19,945 20,994 21,555 Per Capita GNI at Market Prices EC$ 18,259 18,881 19,344 18,619 18,498 18,186 18,926 19,818 20,573 OTHER Mid Year Population 68,890 69,866 70,856 72,310 76,886 78,320 79,781 81,270 82,786 Value of Exports (FOB) EC$M Value of Imports (CIF) EC$M Balance of Visible Trade EC$M (921.30) (950.61) (1,039.33) (956.46) (931.22) (972.12) (1,019.01) (1,076.35) (1,186.73) Consumer Price Index % Change Implicit GVA Deflator % Change (0.06) Government Recurrent Revenue EC$M Government Recurrent Expenditure EC$M Total Stay-Over Visitors ' Cruise Ship Visitors ' Electricity Consumed '000kwh 115, , , , , , , , ,897 Total External Debt Outstanding (public sector) EC$M Debt Service (Cash Basis) EC$M Interest EC$M Amortisation EC$M SOURCE: CSO, ECCB 61

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57 ATTORNEY GENERAL OF THE STATE OF NEW YORK INTERNET BUREAU IN THE MATTER OF PAYPAL, INC. ASSURANCE OF DISCONTINUANCE Pursuant to the provisions of Executive Law 63(12) and General Business Law Article 22-A, ELIOT SPITZER, Attorney General of the State of New York, caused an inquiry to be made into certain business practices of PayPal, Inc., regarding online gambling activities carried on by third parties. As a result of such inquiry, the Attorney General finds: ATTORNEY GENERAL S FINDINGS A. Online Gambling: Background 1. It is estimated that in 2002, Americans will gamble more than $4 billion over the Internet, the vast majority of it through credit cards. While all gambling has social costs, online gambling can have uniquely pernicious effects. For instance, it is generally considered more addictive than offline gambling, because gambling addicts can wager in the comfort of their own homes, without actual money or chips in hand thus masking psychologically the destructive effects of their behavior. One recent report published by the American Psychological Association concluded that [t]he availability of Internet gambling may draw individuals who seek out isolated and anonymous contexts for their gambling behaviors. See Study: Internet Gambling Stakes are High, CNN.com/Health, March 17, 2002.

58 2. Moreover, there is no effective way to prevent minors from gambling, whether with their own or with their parents credit cards. 3. Additionally, and perhaps most destructively, online gamblers can -- and often do -- gamble on credit. In turn, compulsive gamblers credit card losses are limited not to what they possess in hand, but rather to their entire line of credit, potentially on several different credit cards, amounting to tens -- even hundreds -- of thousands of dollars, and incurring high interest charges. B. PayPal s Activities: Background 4. PayPal is a Delaware corporation, with its principal place of business at 303 Bryant Street, Mountain View, California. It also maintains offices at John Galt Boulevard, Omaha, Nebraska. 5. PayPal operates an Internet payment system that provides a means by which businesses and individuals can send and receive online payments. Its payment system employs the existing financial infrastructure of bank accounts and credit cards, but permits individuals and businesses (particularly small businesses) to send and receive online payments using only PayPal as the intermediary. 6. PayPal s system permits relatively widespread access in several respects. For instance, sellers that have not opened, or could not open, a merchant banking account may open accounts through PayPal, by which they may receive consumers payments (placed through the Visa and MasterCard associations). This is possible because the PayPal system effectively provides such merchants with access to PayPal s own merchant banks, which are in turn members of the Visa and/or MasterCard bank card associations. Alternatively, PayPal sellers can accept consumers funds 2

59 directly from consumer bank accounts, thus bypassing the need for the consumer to write bank checks, and for the seller to accept and deposit those checks. Finally, PayPal sellers and buyers can transact business solely by accessing existing balances of funds held by the buyer. 7. PayPal s revenues derive largely from fees that it charges its business accounts. Over the year running from March 31, 2001 through March 31, 2002, these fees generally ranged from two to four percent per transaction, depending on a number of factors regarding each merchant s size, business activities, and the method of payment. 8. As of June 30, 2002, PayPal had approximately 17.8 million member accounts (reflecting accounts held both by merchant and individual consumers), approximately 1.1 million of which list a New York address. C. PayPal s Provision of Services to Online Gambling Merchants 9. Since fall 2000, PayPal has processed payments for certain online gambling-related merchants, including online casinos and betting operations. In its prospectus filed with the SEC on June 28, 2002, PayPal, in enumerating potential risk factors to its business, confirmed (p. 15): Some online casinos use our product to accept and make payments. If these casinos are operating illegally, we may be subject to civil or criminal prosecution for numerous laws, including but not limited to money laundering laws. PayPal s 10-Q statement, filed with the SEC on May 15, 2002, similarly stated (p. 34): Some online casinos use our product to accept and make payments. If these casinos are operating illegally, which is uncertain, we may be subject to civil or criminal prosecution. See also PayPal s S-1 Registration Statement filed with the SEC and dated September 28, 2001, at p. 10 (offering similar statements). 3

60 10. Through a variety of internal investigative procedures, PayPal generally has been able to identify online gambling merchants operating through its payment system. Because such merchants often pose greater financial and legal risks than do other merchants, PayPal has investigated the holders of such accounts and (among other things) their respective financial condition, web sites, company and industry types, and their licenses to operate in home jurisdictions. Pursuant to these procedures, PayPal has identified approximately 260 members, with approximately 525 separate accounts, that are online gaming-related service providers, and online gaming merchants. A list of these merchants (not necessarily exhaustive) is attached as Tab A to this Assurance of Discontinuance ( Assurance ). 11. Furthermore, as to specific transactions, PayPal s payment system often is able to identify payments to online gambling merchants as the transactions occur. At the time such payments are made, if the payments are funded by credit card or debit card, PayPal provides information to its card processor so the processor will identify such transactions to the Visa and MasterCard systems as online gambling. Credit card issuing banks may then block such transactions from their own lending operations, as many such banks have done Through targeted marketing efforts, PayPal has on occasion sought to establish and/or reinforce its business relationships with online casinos. In doing so, it has reached out to such entities in 1 In response to, inter alia, concerns and lawsuits regarding extensions of credit for potentially or assertedly illegal activities that occur across their credit systems, Visa and MasterCard have enacted computerized coding systems that inform their respective issuing banks when they are processing transactions identified by merchants as online gambling. Under these coding systems, when a cardholder bets online, the credit card issuing bank is simultaneously informed, by computer code, that the transaction is occurring. Issuing banks then have the option to decline any and all such coded transactions. In order to avoid playing a role in such online gambling transactions, thousands of issuing banks therefore have blocked all transactions coded to indicate online gambling. 4

61 an effort to solidify its ties to such businesses and throughout the online gaming industry. 13. Based upon discussions with the Attorney General s Office, and as further set forth herein, PayPal now agrees to cease processing transactions involving payments by New York PayPal members to merchants that PayPal has identified or identifies in the future as online gambling merchants. PayPal further represents that it has ceased submitting to the MasterCard system transactions identified as online gambling transactions. Such cessation was initiated based on independent agreements reached between PayPal and MasterCard. D. The Status of Online Gambling under New York Law 14. Betting and gambling are illegal in New York. N.Y. Gen. Oblig. Law states that [a]ll wagers, bets or stakes, made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty, or unknown or contingent event whatever, shall be unlawful. N.Y. Gen. Oblig. Law further renders void all contracts based on such wagers, bets, or stakes. 15. The New York Constitution, art. I 9 states, no... bookmaking, or any other kind of gambling [with certain exceptions pertaining to lotteries and horseracing] shall hereafter be authorized or allowed within this state. 16. Further, in July 2001, the Second Circuit held in United States v. Cohen, 260 F.3d 68 (2d Cir. 2001), that 18 U.S.C which prohibits the use of wire communications to take bets or wagers, or transmit information that assists the placement of bets or wagers on sports contests - - was applicable to a foreign offshore sports betting operation used by persons located in New York State. 17. Similarly, in The People of the State of New York v. World Interactive Gaming Corp., 5

62 185 Misc. 2d 852 (Sup. Ct. N.Y. Co. 1999), the New York Supreme Court, applying N.Y. Penal Law 225 (prohibiting promotion of gambling) held that the State of New York could properly enjoin a gaming enterprise, legally licensed in another jurisdiction yet having a presence in New York, from providing gambling to Internet users in New York. The Court also recognized the deep-rooted policy of the state against unauthorized gambling. 18. In recognition of the above-stated New York law and policy against unauthorized gambling, in voluntary cooperation with the Attorney General, and as further set forth herein, PayPal is now willing to enter into this Assurance without admitting to the Attorney General's findings or to any violation of law. In turn, the Attorney General is willing to accept this Assurance pursuant to Executive Law 63(15) in lieu of commencing a statutory proceeding based on the activities described in 10 through 12 herein. AGREEMENT IT IS HEREBY UNDERSTOOD AND AGREED by and between the parties that: 19. This Assurance shall be binding on and apply to PayPal, whether acting now or hereafter in its own capacity or through any of its officers, directors, servants, agents, employees, assignees, or any individual, subsidiary, division, or other entity through which PayPal may now or hereafter act, as well as any successors in interest. 20. Effective no later than September 1, 2002, PayPal shall cease processing any payments for online gambling merchants, where such payments involve PayPal s New York members, other than payments for gaming transactions that are expressly authorized under New York law. This cessation 6

63 shall apply to all merchants identified at Tab A, and to any merchants further identified, in the future, by the procedures described in 10 through 12 herein. 21. Further, effective no later than September 1, 2002, PayPal shall institute procedures to block automatically, and not to submit to the credit card systems, any credit card or debit card funded payments by PayPal s New York members that, under Visa or MasterCard rules, should be coded to indicate they are both (1) gambling or betting transactions and (2) e-commerce transactions, unless such payments are for transactions expressly authorized by New York law. 22. Further, effective no later than September 1, 2002, PayPal shall, upon determining (e.g., through its merchant investigation procedures) that a member s website reflects or represents conduct that violates any state or federal law, report such member and website to an appropriate law enforcement authority. For instance, should PayPal determine that a member advertises for sale on its website controlled substances without a doctor s prescription (or words to similar effect), PayPal shall report such member to the appropriate state attorney general s office, or to the appropriate federal agency if such member is not based in the United States, and/or to such other law enforcement or regulatory offices PayPal believes appropriate. 23. PayPal shall pay the sum of $200,000 to the New York State Department of Law as and for disgorgement of profits related to online gambling, penalties and costs of investigation. This payment shall be made by check or certified check, and be delivered to the Attorney General within ten days of the execution of this Assurance. 24. Within forty-five days of the execution of this Assurance, PayPal shall file with the Attorney General an affidavit, completed by an officer of PayPal knowledgeable of PayPal s business 7

64 practices, describing PayPal s compliance with all the terms of this Assurance, and supplying copies of all relevant documentation. 25. Nothing contained in this Assurance shall be construed to limit or affect the rights of any persons or entities who are not parties to this agreement with respect to any of the matters contained herein. 26. The acceptance of this Assurance by the Attorney General of the State of New York shall not be deemed or construed as an approval by the Attorney General of any of PayPal s activities or practices, past or present, and PayPal will not make any representations to the contrary. 27. The Attorney General makes no finding herein regarding any aspect of PayPal s system not specifically referenced in 6 through 12 herein. 28. Such agreement or forbearance on the part of the Attorney General as described in 18 herein, to avoid commencing a statutory proceeding, is conditioned upon PayPal s compliance with the conditions herein, and upon the truthfulness of PayPal s statements herein and during the course of the Attorney General s investigation. 29. Except as provided herein, no party to this Assurance relinquishes or waives any legal rights or arguments with respect to this Assurance, its subject matter or enforcement, and the entry into this Assurance shall not be deemed to be a waiver of any legal right or argument. Further, the aforementioned payment shall in no way foreclose and/or prohibit the Attorney General from taking further action against PayPal for non-compliance with this Assurance. 30. In the event of any violation of this Assurance, the Attorney General may commence an action or proceeding, under Executive Law 63(12), in which evidence of a violation of this Assurance 8

65 shall constitute prima facie evidence of a violation of the applicable law WHEREFORE, the following signatures are affixed hereto this 16th day of August, PayPal, Inc. By: ELIOT SPITZER Attorney General of the State of New York 120 Broadway New York, New York (212) By: Kenneth M. Dreifach Assistant Attorney General in Charge Internet Bureau Daniel L. Feldman Assistant Deputy Attorney General Brian Stettin Assistant Attorney General 9

66 Statement of John G. Malcolm, Deputy Assistant Attorney General, at the Special Briefin... Page 1 of 5 8/24/2007 this Document! November 20, 2002 U.S. Department of Justice Criminal Division Office of the Deputy Assistant Attorney General Washington, DC Statement of John G. Malcolm Deputy Assistant Attorney General Criminal Division United States Department of Justice At Special Briefing: Money Laundering and Payment Systems in Online Gambling Sponsored By World Online Gambling Law Report London, England It is a pleasure to speak to you today about some of the many issues involved with on-line gambling. Let me state at the outset that when I refer to on-line gambling, I am including within that definition gambling and gaming of all types, be it casino-type games or sporting events, and I am also including gambling by other technologies, such as through interactive television. For purposes of United States law, these distinctions are not as significant as they are under the laws of other countries. As you all know, the number of Internet gambling sites has increased substantially in recent years. While there were approximately 700 Internet gambling sites in 1999, it is estimated that by 2003, there will be approximately 1,800 such sites generating around $4.2 billion. In addition to on-line casino-style gambling sites, there are also numerous off-shore sports books operating telephone betting services. These developments are of great concern to the United States Department of Justice, particularly because many of these operations are currently accepting bets from United States citizens, when we believe that it is illegal to do so. The United States has other concerns too, some of which I would like to talk about today. In the United Kingdom, as you know, many forms of on-line gambling are permitted. Moreover, it is not illegal for British residents to gamble on-line nor is it illegal for overseas operators to offer on-line gambling to British residents. In short, the United Kingdom has opted to regulate the online gaming industry. The United States has taken a different approach, opting instead to prohibit on-line gambling. The Internet and other emerging technologies, such as interactive television, have made possible types of gambling that were not feasible a few years ago. For example, a United States citizen can now, from his home at any hour of the day or night, participate in an interactive Internet poker

67 Statement of John G. Malcolm, Deputy Assistant Attorney General, at the Special Briefin... Page 2 of 5 8/24/2007 game operated by a computer located in the Caribbean. Indeed, a tech-savvy gambler can route his bets through computers located in other countries throughout the world, thereby obscuring the fact that he is placing his bet from the United States or from some other country where it is illegal to do so. On-line gambling also makes it far more difficult to prevent minors from gambling. Gambling websites cannot look at their customers to assess their age and request photo identification as is possible in traditional physical casinos and Off-Track-Betting parlors. Similarly, minors, many of whom are more tech-savvy than their parents, can and do devise methods of defeating ageverification procedures offered by some, but not all, on-line gambling companies. Although some companies are developing software to try to detect whether a player is old enough to gamble or whether that player is from a legal jurisdiction, such software has not been perfected and would, of course, be subject to the same types of flaws and vulnerabilities that could be exploited by hackers. Unlike on-site gambling, on-line gambling is readily available to all and permits the user to gamble, in many cases, anonymously. As was recently pointed out by the American Psychiatric Society: Internet gambling, unlike many other types of gambling activity, is a solitary activity, which makes it even more dangerous: people can gamble uninterrupted and undetected for unlimited periods of time. Indeed, the problems associated with pathological and problem gamblers, a frighteningly-large percentage of which are young people, are well-established and can be measured in the ruined lives of both the gamblers themselves and their families. Although there are certainly legitimate companies who are either operating or who want to operate on-line casinos in an honest manner, the potential for fraud connected with casinos and bookmaking operations in the virtual world is far greater than in the physical realm. Start-up costs are relatively low and cheap servers and unsophisticated software are readily-available. On-line casinos and bookmaking establishments operate in many countries where effective regulation and law enforcement is minimal or non-existent. Like scam telemarketing operations, on-line gambling establishments appear and disappear with regularity, collecting from losers and not paying winners, and with little fear of being apprehended and prosecuted. Through slight alterations of the software, unscrupulous gambling operations can manipulate the odds in their favor, make unauthorized credit card charges to the accounts of unsuspecting gamblers, or alter their own accounts to skim money. There is also a danger that hackers can manipulate the online games in their favor or can steal credit card or other information about other gamblers using the site. In the United States, both federal and state laws apply to on-line gambling. Historically, the individual states were left to determine what forms of gambling could be offered within an individual state s borders and to regulate such gambling. Not surprisingly, different states have different laws about gambling. For example, the State of Nevada permits and regulates casinos and sports bookmaking operations; while the neighboring State of Utah, on the other hand, does not permit any gambling. This poses a particular problem in the on-line world because, as I previously stated, the person placing a bet may not be located in the same state or even the same country as the person receiving the bet. The Department of Justice views a gambling transaction as occurring in both the jurisdiction where the bet is placed by the bettor and in the jurisdiction where the gambling business that receives the bet is located. Thus, if Internet gambling were regulated in the United States, it would be subject to, and would need to be in compliance with, fifty differing sets of gambling laws,

68 Statement of John G. Malcolm, Deputy Assistant Attorney General, at the Special Briefin... Page 3 of 5 8/24/2007 which would pose certain unique problems. While the prosecution of individual bettors and intra-state gambling crimes are largely left to the individual states, there are numerous federal gambling statutes that the Department of Justice has employed against large-scale gambling businesses that operate interstate or internationally. One such statute is the so-called Wire Act, which is codified at Section 1084 of Title 18 of the United States Code. This statute makes it a crime, punishable up to two years in prison, to knowingly transmit in interstate or foreign commerce bets on any sporting event or contest. It is the Department of Justice s position that this prohibition applies to both sporting events and other forms of gambling, and that it also applies to those who send or receive bets in interstate or foreign commerce even if it is legal to place or receive such a bet in both the sending jurisdiction and the receiving jurisdiction. This view was upheld by the Second Circuit Court of Appeals in the recent successful federal prosecution of Jay Cohen, who was the President of World Sports Exchange, a company which was based in Antigua but which accepted bets via the telephone and the Internet from citizens in the United States. Another federal statute that is applicable to on-line gambling is Section 1955 of Title 18, United States Code, which makes it a crime, punishable by up to five years in prison, to conduct, finance, manage, supervise, direct, or own all or part of a gambling business, so long as it is illegal to operate such a business under state law. In addition to criminal penalties, this section also contains a civil forfeiture provision, which the Department of Justice has used on occasion to great effect. For instance, the Department of Justice recently used this provision to forfeit nearly three-quarters of a million dollars that had been seized from a New Jersey corporation named Intercash Ltd. that served as an intermediary between U.S. gamblers and an English gambling house named American Sports Limited.1 Other statutes which the Department of Justice has employed against illegal on-line gambling operations would include the Racketeer Influenced and Corrupt Organizations Act (more commonly known by its acronym RICO), which can be found at Sections of Title 18 of the United States Code, as well as Section 1952 of Title 18, United States Code, which is also referred to as the Travel Act, which makes it a crime to use interstate or foreign facilities in aid of unlawful activity, which includes gambling. There is also Section 1953, which prohibits the transmission of wagering paraphernalia, as well as other criminal and civil statutes that can be applied in this context. In addition to these statutes that have already been enacted, Congress is currently considering legislation that would prohibit certain forms of payments, including credit card payments, for illegal Internet gambling. This bill passed the House of Representatives last month and is still pending in the Senate. In addition to the federal government, various state governments have also taken actions against on-line gambling. For instance, in New York State, where unauthorized gambling is illegal, the New York State Attorney General reached an agreement with Citibank to block credit card payments of on-line gambling transactions by its customers. The same Attorney General recently reached an agreement with PayPal, which agreed to stop processing payments from New York State customers to on-line gambling merchants. Some companies have taken steps themselves against on-line gambling businesses. For instance, just last month, PayPal was acquired by E-Bay, the on-line auction service, which announced that it will phase out PayPal s on-line gambling business by the end of the year. Both Discover and American Express have company policies that restrict the use of their credit cards for Internet

69 Statement of John G. Malcolm, Deputy Assistant Attorney General, at the Special Briefin... Page 4 of 5 8/24/2007 gambling and prevent Internet gambling sites from being issued credit card merchant accounts. In addition to on-line gambling itself, the United States government is also concerned about the substance and scope of advertising for on-line gambling. Advertisements for on-line gambling are omnipresent on the Internet, in print ads, and over the radio. The United States Federal Trade Commission recently looked at this issue and found, not surprisingly, that advertisements for gambling over the Internet appear even on websites oriented towards children. The shear volume of advertisements for offshore sports books and online casinos is troubling because it misleads the public in the United States to believe that such gambling is legal, when in fact, it is not. Indeed, as I am sure you all know, many of these advertisements affirmatively foster that erroneous belief. Some states which outlaw the promotion of gambling have taken action to curtail these advertisements. For instance, in December 2001, the Colorado Attorney General and the Colorado Limited Gaming Control Commission sent notices to certain radio operators asking them to stop broadcasting advertisements for Internet casinos and sports bookmaking operations. Similarly, in February 2002, the California Horse Racing Board and the California Broadcasters Association sent notices to every radio and television station in California to stop running advertisements for illegal off-shore wagering services. Another major concern that the Department of Justice has about on-line gambling is that Internet gambling businesses provide criminals with an easy and excellent vehicle for money laundering, due in large part to the volume, speed, and international reach of Internet transaction and the offshore locations of most Internet gambling sites, as well as the fact that the industry itself is already cash-intensive. It is a fact that money launderers have to go to financial institutions either to conceal their illegal funds or recycle those funds back into the economy for their use. Because criminals are aware that banks have been subjected to greater scrutiny and regulation, not surprisingly, they have turned to other non-bank financial institutions, such as casinos, to launder their money. On-line casinos are a particularly inviting target because, in addition to using the gambling that casinos offer as a way to hide or transfer money, casinos offer a broad array of financial services to their customers, such as providing credit accounts, fund transmittal services, check cashing services, and currency exchange services. Individuals wanting to launder ill-gotten gains through an on-line casino can do so in a variety of ways. For example, a customer could establish an account with a casino using illegally-derived proceeds, conduct a minimal amount of betting or engage in offsetting bets with an overseas confederate, and then request repayment from the casino, thereby providing a new source of the funds. If a gambler wants to transfer money to an inside source in the casino, who may be located in another country, he can just play til he loses the requisite amount. Similarly, if an insider wants to transfer money to the gambler, perhaps as payment for some illicit activity, he can rig the game so the bettor wins. The anonymous nature of the Internet and the use of encryption makes it difficult to trace the transactions. The gambling business may also not maintain the transaction records, in which case tracing may be impossible. While regulators in the United States can visit physical casinos, observe their operations, and examine their books and records to ensure compliance with regulations, this is far more difficult, if not impossible, with virtual casinos. Similarly, in the United States, land-based casinos are now required to file suspicious activity reports with the Treasury Department s Financial Crimes Enforcement Network. The USA Patriot

70 Statement of John G. Malcolm, Deputy Assistant Attorney General, at the Special Briefin... Page 5 of 5 8/24/2007 Act, which was enacted in the aftermath of the tragic events of September 11, 2001, requires all financial institutions, which now specifically includes casinos, to adopt money laundering compliance programs. Less than two months ago, the Treasury Department published its final rules pertaining to the maintenance of Bank Secrecy Act compliance programs by casinos and card clubs. Detecting money laundering and ensuring compliance with these new regulations will be difficult enough when it comes to physical casinos. The difficulty of these tasks will increase immeasurably, and perhaps become insurmountable, if virtual casinos are permitted to flourish. In conclusion, let me state that although the United States Department of Justice continues to believe that interstate on-line gambling should be prohibited, we realize that other countries disagree and have opted to pursue the regulatory route. Because not all countries have outlawed on-line gambling and because of the inherently-international nature of these on-line operations, the United States recognizes the need for international cooperation to combat money laundering and other illicit activities connected with the on-line gaming industry, problems which we all share. We look forward to working together with you in that effort. 1 United States v. $734, in United States Currency, 286 F. 3d 641 (3d Cir. 2002) More information on: Prosecuting Crimes Facilitated by the Internet More information on: Congressional Testimony More information on: Electronic Commerce Legal Issues Want to receive news of updates to the cybercrime.gov website? Send a blank message to: cybercrime-subscribe@topica.com and we will add you to our newsletter list. (Mailing list privacy information) Go to... CCIPS Home Page Justice Department Home Page Last updated August 31, 2005 usdoj-crm/mis/krr

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83 Federal Bureau of Investigation - Press Room - Headline Archives - FBI NEWS QUIZ/str... Page 1 of 2 8/30/2007 Contact Us Your Local FBI Office Overseas Offices Submit a Crime Tip Report Internet Crime More Contacts Learn About Us Quick Facts What We Investigate Natl. Security Branch Information Technology Fingerprints & Training Laboratory Services Reports & Publications History More About Us Get Our News Press Room Updates News Feeds Be Crime Smart Wanted by the FBI More Protections Use Our Resources For Law Enforcement For Communities For Researchers More Services Visit Our Kids' Page Apply for a Job 06/06//07 Headquarters. That means: Headline Archives ONLINE GAMBLING Don t Roll the Dice If you ve ever thought about visiting a cyber casino, here s something you should know: it s illegal to gamble online in the United States. You can go to Vegas. You can go to Atlantic City. You can go to a racetrack. You can go to those places and gamble legally. But don t do it online. It s against the law, says Leslie Bryant, head of our Cyber Crime Fraud unit at FBI No placing cyber bets on sporting events or in virtual card games; No transferring money electronically for gambling; and No wagers in offshore Internet casinos even if you live in the U.S. What s allowed? Some free online games, fantasy leagues, and Indian gaming sites that aren t strictly defined as Internet gambling. It s also illegal for businesses to run gambling websites and to solicit online bets. Even companies handling transactions for cyberspace bettors can face federal charges. Cracking down. Our strategy for tackling illegal online gambling as a key enforcement agency is to start with the companies providing the services in the first place. We re going after the people making the money the owners of these virtual casinos, gaming rooms, and offtrack betting parlors, Bryant says. We currently have about a dozen of these cases in motion. One of the biggest came last July when a federal grand jury in St. Louis returned a 22-count indictment against 11 individuals and four companies for their involvement in illegal online gaming and related activities. On May 24, one of the companies BetonSports pled guilty to racketeering charges in the case. We ve also had success against companies supporting the money flows behind virtual gambling. In January, for example, two Canadians were charged with operating an Internet payment services company that transferred billions of dollars in illegal gambling proceeds between U.S. citizens and the owners of online gambling sites outside the Headline Archives Headline Story Index August - July - June - May - April - March - February - January December - November - October - September - August - July - June - May - April - March - February - January January - February - March - April - May - June - July - August - September - October - November - December January - February - March - April - May - June - July - August - September - October - November - December