European Union Investigates Possible US International Trade Violations

[The Fan]

European Union Investigates Possible US International Trade Violations
by Lou Krieger filed under Poker News on 2008-03-24 [Originally appeared in the March 31, 2008 issue of Poker Player]

Banks will not be held criminally liable for failing to stop online gambling transactions. This was the result of a decision by Judge Mary L. Cooper, of the U.S. District Court for the District of New Jersey, that came about when an iMEGA.org, a trade organization, challenged the enforcement provisions of the Unlawful Internet Gambling Enforcement Act (UIGEA).

An 11-page letter drafted by the American Banking Association (ABA) and submitted to the US Treasury in December states: "ABA believes that the proposal, in large part due to the nature of the statute itself, will fail to create a practical process for intercepting prohibited conduct that maintains an efficiently functioning payments system."

The letter also said that "...UIGEA will in the end catch more banks in a compliance trap and do greater damage to the competitiveness of the American payments system, than it will stop gambling enterprises from profiting on illegal wagering."

iMEGA insisted all along that this unfunded mandate amounted to deputizing the banking institutions to police online gambling, but without providing the weapons to do so.

The document asserts: "In other words, in the view of the drafters of the legislation, all the sophistication of the FBI, Secret Service, and other police computerized detection systems and investigative expertise devoted to fighting terrorism and financial crime are inadequate to the task of apprehending the unlawful gambling business or confiscating its revenues. ABA believes that punting this obligation to the participants in the US payment system is an unprecedented delegation of governmental responsibility with no prospect of practical success in exchange for all the burden it imposes."

The US Government, when asked to comment on the decision, responded that they would not be doing so. Meanwhile, Congressman Barney Frank's Internet Gambling Regulation and Enforcement Act, which was introduced last year, will go to a committee hearing in Congress this spring.

According to a spokesperson for Frank, a hearing in the House Financial Services Committee had been scheduled for early April. This news came as Congressman Jim McDermott announced the reintroduction of a taxation bill for legalized internet gambling.

Michael Waxman, of the Washington based lobby group Safe and Secure Internet Gambling Initiative said that the legislation, which is designed to accompany Frank's bill, is the result of a longterm plan to introduce a taxation regime that PriceWaterhouseCoopers estimates could bring in revenues of between $8 billion and $42 billion.

Waxman said: "It is a similar bill to last year's, and McDermott has taken some of what he has learned in the last year and put it into this bill. The most important thing is that this is a powerful statement and will educate members of Congress in why regulated internet gambling is the way forward."

While all of this was going on, Congressman Peter DeFazio (D-OR) called for the U.S. Trade Representative (USTR) to disclose trade concessions made to foreign trading partners without Congressional approval.

DeFazio's inquiry raises the possibility of Congressional intervention to void new market access commitments granted by USTR to the European Union and other complainants as compensation for a United States trade violation regarding Internet gambling.

In a letter circulated to all members of Congress last week, DeFazio encouraged his colleagues to join him in calling for the USTR to provide a copy of the concession agreement between the United States and the European Union.

The USTR recently rejected a Freedom of Information Act request for the same document, claiming that it was classified for national security reasons. "There is a concern that the USTR may have been ambitious in its use of a 'national security' classification to avoid any publicity of which new business sectors are to be subject to the GATS (General Agreement on Trade in Services) treaty," said DeFazio's March 6 letter.

DeFazio's request suggests that the Administration's attempt to resolve the WTO Internet gambling dispute unilaterally is in jeopardy. "The issue will be whether the USTR abused its authority by granting new market access to the EU without first securing the consent of the trade committees in Congress," said Nao Matsukata, formerly Director of Policy Planning for USTR Robert Zoellick. "Ultimately, this could invalidate the deal with the EU and cause various WTO Members to revisit the issue of fair compensation from the United States."

DeFazio's letter was the most recent salvo fired in a contentious trade dispute over Internet gambling, in which Antigua challenged the regulation of Internet gambling in the United States. The European Union recently announced that it will open an investigation into a possible international trade violation by the US on this issue, based on a Trade Barriers Regulation complaint filed by the Remote Gambling Association (RGA), an organization that represents the largest remote gambling companies in Europe.

RGA claims the US is in violation of international trade law by threatening and pursuing criminal prosecutions, forfeitures and other enforcement actions against foreign Internet gaming operators, while allowing domestic U.S. online gaming operators, primarily horse betting, to flourish.

Legislation introduced by Representative Barney Frank (D-MA), the Internet Gambling Regulation and Enforcement Act (H.R. 2046), would regulate Internet gambling and resolve the international trade dispute.

"Rather than paying out millions in trade concessions, which would have an adverse impact on the American economy, the US should embrace the legislative solution presented by the Frank bill, which brings the U.S. into compliance by regulating Internet gambling and creating a level playing field among domestic and foreign Internet gambling operators," said Jeffrey Sandman, spokesperson of the Safe and Secure Internet Gambling Initiative.

He added, "Congress should have been consulted before the US agreed to these trade concessions. We hope that Mr. DeFazio's colleagues will join him in demanding more transparency, communication, and consultation from the Administration on Internet gambling. A non-discriminatory market for Internet gambling in the United States will restore integrity to the international trading system."