Compliance with the Joint Rule on Unlawful Internet Gambling Enforcement Act--What Now? June 10, 2010

Transcription

1 Compliance with the Joint Rule on Unlawful Internet Gambling Enforcement Act--What Now? June 10, :00PM 1:00PM EDT The panel is in practice session 1

2 Can you hear the sound check? It has begun 2

3 Technical Assistance & Audio Broadcast Technical Assistance Send a message via the Q & A box Or Call Live Meeting Support: (US) Or Dial: *0 after joining the teleconference Attendee instructions on how to use Audio Broadcast If you are not able to listen to the audio on your computer speakers, please adjust the volume in the sound card. If you are still not able to hear audio, you will need to join the teleconference. To join the teleconference, find the Meeting button on the top left side of your screen and follow the Call-In Details let us know if you require the list of international call-in numbers. Do not forget to enter the Participant Passcode number when dialing in. 3 Compliance with the Joint Rule on Unlawful Internet Gambling Enforcement Act--What Now? June 10, 2010

4 Compliance with the Joint Rule on Unlawful Internet Gambling Enforcement Act--What Now? Moderator: John Byrne, CAMS Executive Vice President Association of Certified Anti-Money Laundering Specialists 4

5 Today s speakers are Kevin M. Anderson, CAMS Senior Vice President Bank of America Aaron Borst, CAMS Director of Surveillance Capital One N.A. Nina A. Nichols, Esq. Assistant Director for Compliance Risk Division of Banking Supervision and Regulation of the Board of Governors Federal Reserve System 5

6 UIGEA provisions UIGEA (2006) Prohibits acceptance of payment relating to bet or wager involving use of the Internet if unlawful under applicable law ( Restricted Transactions ) Does not define unlawful Internet gambling Covers commercial establishments, not individual gamblers Requires Federal Reserve and Treasury to promulgate final regulations 6

7 UIGEA: Final Rule Defines terms used in regulations Designates covered payment systems Provides exemptions for certain payment systems participants Requires non-exempt participants to have policies and procedures reasonably designed to prevent Restricted Transactions Provides non-exclusive examples of policies and procedures 7

8 Final Rule: Effective Date and Examination Procedures Effective date is January 19, 2009 (73 FR 69382). Compliance required as of June 1, Notice to existing commercial customers. Statements from system operators (card systems). Procedures for accounts established on/after June 1. Policies/procedures should be applied to existing accounts if participant has knowledge that the customer is engaged in an Internet gambling business. Interagency examination procedures for UIGEA compliance: 8 1a1.pdf.

9 UIGEA and BSA/AML Compliance Financial institutions may incorporate UIGEA policies and procedures in BSA/AML compliance, and BSA/AML examinations of banks may cover UIGEA compliance. No matter how UIGEA is addressed operationally: UIGEA compliance is not within the legal scope of BSA/AML requirements; UIGEA compliance is not covered by the AML program rule; UIGEA examinations are not covered by the FDI Act mandate for BSA examinations; and UIGEA does not supersede any other compliance requirements, including AML requirements for risk assessment, customer due diligence and reporting suspicious activity. 9

10 Five Designated Payment Card systems Systems Credit, debit, stored value Automated Clearing House systems Wire transfer systems Check clearing systems Money transmitting systems 10

11 11 Non-Exempt Participants: General Principles Rule focuses on preventing Restricted Transactions by requiring payment system participants to conduct due diligence on commercial customer. Non-exempt participants are those with a direct account relationship to commercial customer. Participants without direct relationships are generally exempt. Exception: card systems. Transaction coding enables participants to monitor transactions.

12 Designated Payment Systems and Non-Exempt Participants Card systems Issuers; merchant acquirors; operators; third-party processors 12 ACH systems RDFI, credit transactions; ODFI, debit transactions; gateway operator for crossborder debits; third-party processors Compliance with the Joint Rule on Unlawful Internet Gambling Enforcement Act--What Now? June 10, 2010

13 Designated Payment Systems and Non-Exempt Participants Wire transfer Beneficiary s bank Check collection Depositary bank First U.S. bank for crossborder check receipts 13 Money transmitting businesses Operators of money transmitting businesses that permit remote initiation of funds transfers (such as via Internet or telephone)

14 Policies and Procedures 14 Operator-driven systems: Operator must have policies and procedures Participant may maintain own policies or Participant may rely on operator s policies and procedures if: Participant has written statement or notice from operator; Participant is in compliance with operator s policies; Participant s regulator has not notified participant of operator s non-compliance.

15 Policies and Procedures 15 Written notice to all existing commercial accountholders that accounts must not be used for Restricted Transactions Notice to be given by June 1, 2010 Flexibility as to mechanism for providing notice Account documents Website

16 Policies and Procedures: Minimal Risk 16 Due diligence on commercial customer relationships Establishment of account: determination whether customer poses minimal risk of engaging in Internet gambling business. Rule provides examples (government, supervised entities) Due diligence at account-opening indicates minimal risk If minimal risk, no further due diligence required

17 17 Policies and Procedures: Undetermined or High Risk If participant cannot determine whether accountholder poses minimal risk of engaging in Internet gambling business, customer must provide documentation: Certification from customer it is not so engaged Or License from State or tribal authority or reasoned legal opinion ; Customer commitment to advise of changes in authority; and Third-party certification that customer s systems are observant of legal limits

18 Actual Knowledge of Restricted Transactions Actual knowledge defined narrowly in rule (information from law enforcement or regulator) Procedures to address actual knowledge by Participant that commercial customer has received funds in Restricted Transactions Continued transaction processing Account review SAR filing Account closure Cross-border debits: actual knowledge that foreign sender has sent instructions for Restricted Transactions No due diligence requirement with respect to correspondent s customers 18

19 Implementation of UIGEA in an Financial Institution Determine approach to compliance What are minimum requirements to comply with UIGEA? How will UIGEA be implemented? How will oversight of implementation be performed? Where does it need to be done? 19

20 Implementation of UIGEA in an Financial Institution Determination of minimal risk Further due diligence Notice and disclosures Escalation of potential illegal internet gambling companies 20

21 Card Specific Considerations 21 Association Enrollment Proprietary Blocking Strategies Processor Relationships Transaction Testing Merchant Acquisitions New Association Programs VISA MVV Master Card new MCC

22 SAR Filing Reg GG vs. BSA Requirements The Legal Landscape Consumers vs. Commercial Entities Who is a suspect? 22 Closing accounts and other post SAR considerations

23 Questions?????s Locate the Q & A button on top left side of the Live Meeting platform. Type in your question and click send! 23

24 If you have additional questions for today s experts, please send them to agonzalez@acams.org Thank you for joining us today! 24

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