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The New Realities for American Sports Bettors, Part III

By FreedomAtStake | View all Posts
Posted Monday, May 30, 2011 01:31 PM

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Continuing from Part II...

3 - It is illegal for American banks to knowingly assist in the transfer of money to offshore gambling companies.

That is the basic gist of the much-hated UIGEA law of 2006.

Banks are not allowed to process any financial instrument (ie. credit card transaction, wire transfer, checks, ACH transfer, e-wallet transfer, ATM withdrawal, gold, clams, cows, beads, etc.) that they believe to be related to offshore gambling.

That's the gist of it. And while the law happens to be very fuzzy about what constitutes "gambling", and exactly how these laws are to be enforced, it is very clear that banks are not allowed to process gambling transactions. That part is clear.

You probably were aware of the general idea that banks aren’t allowed to process credit cards. But most people don't go to the next logical step and realize the widespread effects of this law. They think, "Well, once those offshore guys figure a way around it, it'll be business as usual."

Well that would be correct, and is exactly what has happened since 2006, but nobody really considers what it entails when "those offshore guys figure a way around it".

What it means is that, in order to get money moving between them and you, they need to find a way to transfer funds so that the American banking system is unaware what is happening, otherwise the banks are obliged to block it.

Now, there are old fashioned ways of transferring money which are not directly affected by the UIGEA law, such as mailing cash, using Western Union, hiring a mule to carry it across the border, etc. None of those are particularly safe, cheap or efficient.

So, if you are like most online bettors, you are thinking, "Yeah, but I still managed to pay my sportsbook using credit cards, or ACH, or whatever. And when I get paid, it usually comes via ACH, or a check, or whatever.

That's right. Those industrious offshore companies have found ways around the UIGEA.

And I'm not gonna give away their secret sauce, but it might involve disguising the payments so that the banks are not plausibly aware that these transactions are gambling related. I use the word "plausibly", because I find it hard to believe that any bank would really believe that Joe Smith from Idaho really purchased $500 of handmade maracas directly from a Costa Rican artisan. And if they were really interested, I'm sure the bank could ask you about that $350 check you received last month from that trucking company in Montana.

But - hey - American banks don't like the UIGEA anymore than you do. So they don't ask those questions.

But have you ever thought about the implications of what those offshore guys are doing and how they disguise their purposes to avoid detection by the financial system?

According to Wikipedia: "Money laundering is the practice of disguising the origins of illegally-obtained money. Ultimately, it is the process by which the proceeds of crime are made to appear legitimate."

Sound familiar? If accepting wagers from Americans is illegal, then any disguising of those funds is could be construed as money laundering. At least, that's what the feds are alleging against betEd and the poker sites.

So let’s connect the dots… If an American bank knowingly sees or processes a gambling payment in any sort of way, it is breaking the UIGEA law. If a sportsbook has disguised that payment to trick the banks, then the American government can construe that as money laundering.

That's right. While you and the offshore operators try to convince yourselves that you are only responding to an unjust law in the only way possible, as far as the American government is concerned, those offshore companies are laundering money whether you like it or not. It would take a court of law to sort it out.

Now you can again relax. As the player, you are not doing anything illegal, which is part of the definition. As far as you are concerned, you are making a purchase and receiving a payment. You are doing nothing to disguise those payments, so you are not laundering money.

But if your money has been passing through the American financial system in any way whatsoever without being flagged as gambling by the banks, then either the banks are stupid or complicit, or your sportsbook is treading into troubled waters.

Continue reading Part IV here...

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User:	Freedom@Stake
Joined:	July 1995
Location:	Ireland
Team:	Florida State Seminoles
Occupation:	Media

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