Top Banks Ordered to Hand Over Records Related to Online Gambling
 

Top Banks Ordered to Hand Over Records Related to Online Gambling

Jenny Davey, Times of London


THE US Department of Justice has ordered the world?s biggest investment banks, accountants and law firms to hand over all e-mails, telephone records and papers connected with internet gaming firms as part of an investigation into illegal online gambling in America.

HSBC, Dresdner Kleinwort, Credit Suisse and Deutsche Bank are known to be among the banks that have been issued with subpoenas ? official requests for information ? as part of a worldwide hunt to build a case against those who benefited from illegal online gambling.

Britain has been the fundraising centre for many internet gambling companies, with a number of international operators listing their shares in London.

Fortunes were made by the founders of internet gaming stocks, including Party Gaming, 888.com and Betonsports.com, and advisers pocketed huge fees.

The Department of Justice first issued subpoenas in October, only days after George Bush sounded the death knell for America?s $6 billion (£3.2 billion) internet gambling industry by signing legislation banning all related transactions. But until now the investigation has been kept secret.

According to City sources, the subpoenas have continued to arrive over the past few weeks.

It is thought that some investors in online gambling companies, including Party Gaming and 888.com, have also been hit with requests for information.

One source said: ?To say the situation is sensitive is the understatement of the decade. The problem is, even if you know you have done nothing wrong, you have no powers of resistance.?

He added: ?You can quickly go from being a bystander to a target, so even if you are bomb- proof, you have to assume you are subject to hostility.?

The source went on: ?The Department of Justice has taken a shotgun, not a rifle approach in relation to lots of gaming companies and has just asked everyone to hand over all the information they have.?

The request could force banks and other advisers or former advisers to the gambling companies to hand over hundreds of thousands of e-mails and files to American investigators.

Another City source familiar with the circumstances said: ?There is no doubt at all that this situation is escalating. This has definitely got legs.?

Another source described it as one of the biggest ?fishing expeditions? ever undertaken by the Department of Justice.

Vast riches were made by the founders of internet gambling companies, including Party Gaming and 888.com. Party Gaming floated with a value of £5 billion in the summer of 2005, propelling it straight into the FTSE 100 index ahead of British household names such as British Airways and ICI. Its four founder shareholders ? Anurag Dikshit, Vikrant Bhargava, Ruth Parasol and her husband, Russ DeLeon ? took out £797m and valued their remaining shares at about £ 3.3 billion. Meanwhile, 888.com, which floated in September 2005 valued at £590m, created another batch of dotcom millionaires, this time among the company?s Israeli founders. Avi and Aharon Shaked received more than £10m from selling a quarter of their 70% stake.

The probe by the Department of Justice will spark outrage in Britain, coming so soon after the extradition of the so-called NatWest Three to America.


?UK plc should be really worried about yet another encroachment of American investigators on to British territory. The City is clearly under threat,? said one British businessman who asked not to be named.
The subpoenas do not reveal whom the Department of Justice is targeting. But some believe the ultimate goal is to find information incriminating the founders of the online gambling firms.

The inquiry vindicates the City professionals who refused to act for internet gambling firms because of the uncertainty about its legality in America. Banks that have been subpoenaed have lined up lawyers to act for them.

None of the banks involved would comment on the subpoenas. The Department of Justice also said that its policy was not to comment about ongoing investigations.

HSBC advised 888.com, one of the most high-profile internet gambling companies, on its flotation. Credit Suisse advised the original shareholders of 888.com on their strategic options before the flotation. Deutsche is co-broker to Party Gaming, while Dresdner advised on its public listing.

ruh roh raggy :Oh crap

scary country ....

I just think the hammer to the head approach is just wrong here.

Just get the banks to stop. No one was sure that they were breaking any laws.

america is teh sucks

Oh shit :1orglaugh This is going to get nasty....

Already the US govt is on a collison course with the WTO over "restrictive trade practices" in placing obstacles to gaming transaction money movements across borders - now they appear to be jumping into the frying pan and playing hardball with major financial institutions....

Awesome stuff - and to what end?? *lol*


PS Hope they don't want more credit and IOU's issued by these banks :-)

In God We Trust

Pretty much sums it up right there....

Don't the banks usually just say fuck off?

there's a lot of arm twisting going on lately - threats - trying to link things with pure bullshit (terrorism etc..) overstepping boundries is becoming more common

Sure... and they will - but, then the hardball games start...

Depending how stupid the DOJ wants to step into this swamp, they will threaten or issue subpoenas on eg, the bank branches in New York. In turn, the banks will ignore these subpoenas. The goverment in turn will them seek a court order to impose high penalties on the banks for each day they fail to answer that subpoena. The banks will tolerate these penalties for a short time - then reconsider their position (ultimately questioning their position re operating in US jurisdiction).

But.. there are going to be reams of legal paperwork generated before it gets to that stage - and the WTO is just about to issue it's final penalty/sanction decision (this has already been determined against the US), so there may be a change of policy when that happens.

Exactly :thumbsup And.. ultimately, there is going to be a lot of anti and rucking going on and blocking of the assumed boundaries which the US considers it can step over.

yep - and there is an additional problem in this - mainly the usa banks that have started to buy-up banks all over central and south america - making the lines easier to blurr the lines as to what records they can get access too - just recently CitiBank bought Cuscatlan bank - and a few other acquisitions have taken place

ps.. sent you an icq

I was laughing when I got to your post, because I knew that you were going to get out the out WTO saw.

Here is some news for you: The US for many years charged an unfair levy on all softwood lumber entering the US from Canada, even though we have both a free trade agreement and the WTO. Numerous WTO judgements went against the US, and they continues to charge the levy. Now it is to the point where the Canadian government (wimps) are giving in and negotiating what the amount of the levy should be. With all the WTO judgements they can get, they still cannot get the US to change it's mind, and nobody wants the use out of WTO because then it would collapse altogether.

So the WTO argument is worth less than the time it takes you to type. Please try again.

WTO saw eh? :1orglaugh

Don't assume I was even attempting to make any excuses/arguement for either the WTO or the US.

As with the UN and *any* international organization, of course the attitude of the US will be to attempt to denegrade it since these orgs form a coalition representing the international community.

The fact remains that five countries lodged objections to the WTO who then found against the US and this has reached cleanup time. What the outcome will be is anyone's guess and the same with the effects of any ruling.

It is fairly obvious the attempted arm-twisting and kiddie hardball games being played out by the US govt are not going to go away and will have repercussions.

Meantime... stupidly on the part of the DOJ (and the govt in general) in attempting to step on the legal boundaries of other nations is beyond belief and not of this planet - tho that's not exactly new.

thats so fucked up, glad i live in canada :)

I guess this is not the end to this kind of news.

No wonder Bank of America was so aggressive with me.

Freezing over $125k in accounts had to be due to something.

I have do doubt they will flip on me..

But whats that mean to me??

good time to start packing?

More info:
 

US Department of Treasury Proposes Reporting of Cross Border Wire Transfers

A FinCEN (the Financial Crimes Enforcement Network) report to Congress states that reporting of cross-border wire transfers is technically feasible for the US government but that it requires further collaboration. A press release was issued this past Wednesday, just days after the US government indicted two founders of third party payment processor, NETeller, which conducted much of its business within the United States. NETeller was also heavily involved in the multi-billion dollar industry of online gambling.

Bank wiring has long been considered one of the more private methods in which to send funds via US banking. In gambling circles, this is the method of choice among professional sports bettors.

The FinCEN report suggests that reporting of such data would be useful in the US government's efforts to stop money laundering.

"FinCEN is firmly committed to working with the financial services industry and our partners in regulatory and law enforcement communities to consider the design and implementation of a suitable and efficient potential reporting regime," said William F. Baity, FinCEN's acting Director. "I believe this inclusive, step-by-step approach will allow us to determine the right balance between providing real anti-money laundering and anti-terrorist financing benefits without imposing a burden and will go a long way in helping our efforts to protect our economic and national security."

Building a database of appropriate magnitude will take considerably longer than the originally suggest end of 2007, making this deadline unreasonable, according to the report. The system would take $32.6 million and over three years to build.

Cory Levine, Wall Street & Technology:

"Despite arguing for the feasibility of such a system, the FinCEN report raises the question of data privacy in an era when many private companies and government offices alike struggle to keep sensitive information under wraps. Further, why spend millions of taxpayer dollars on a system to monitor international transactions, when the Treasury is already in cahoots with European financial messaging service provider SWIFT? In 2006 alone, SWIFT completed 1.6 billion payment transaction globally on its network. If FinCEN expects to get this information, it appears to make more sense to continue reaching out to transaction processing utilities, rather than building brand-new systems and placing the burden on FSIs to comply with new regulations.

"Meanwhile, the dust has yet to settle on the privacy issues raised by the information sharing from SWIFT, as reported originally in The New York Times on June 23 of last year. Demanding more transactional data at the expense of the public could lead to some serious Big Brother backlash."

Please keep us posted.

Jesus...... What a mess.

I just hope there isnt some witch hunt for people who placed bets and this is all just a way to scare and pressure banks.

Many people had no idea placing bets online was illegal.. The advertisments you see everywhere, TV, magazines, trade shows, hell even billboards and radio, how could someone with an intrest in poker or sports wagering not get involved.. Myself included.

I didnt realize how serious this issue was until Bank of America shut down my accounts and gave me that lecture about sports wagering..

Im sure till this day the majority of Americans who enjoy sports and poker lesiure wagering have no idea of these new laws..

What a mess. I wonder if the big betters are looking to get into some trouble. Or if the banks that supported them is what is getting pressured here.

What does all this mean? Other than to stop gambling of course.

welcome to the New World Order..they want to chip your kids so the same banks will have TOTAL control over you..all these credit card companies and big banks are just a part of the overall agenda..simple..control the flow of money control the population..
cashless society is the goal and this is how they distrsact you while going about it..

Yeah thats great...

But what does that mean for me, or the avarage gambler?

There are other aspects to this as well Daruma and they are not limited to the gaming industry, but enter the realms of the adult biz.

FinCEN is fine as in so far as it's objects are a mechanism to curtail financial crimes - every nation has something similar.

The problem arises when the parties managing FinCEN can assume "rights" to bend this whatever way they wish and engage in fishing expeditions, both on US citizens and in their relationships with other nations. (The proposed databases are an example).

In the adult industry for example, - it is not by accident that VISA US implemented a system of recording websites and specifically down to membership detail. This recording by US VISA is not applicable to other nations and in effect, means an investigating authority or prosecutor, not only has complete data on website owners/operators who agreed to signup and pay the $700ish implemented a couple of years ago, but also has records of memberships (names and addresses) - and obviously this includes the related financial data - and where indictments can be issued without a prosecutor rising from his desk.

It would not be a surprise to see extensions of gaming arrests of foreign citizens (webmasters) who happen to be on US soil (along with US citizens) for alleged offenses against US domestic laws relating to the adult industry.

Who knows? Only time will tell, but said a few years back that there is a war going on - and it's not any war on terrorism, drugs or whatever excuse is presented. It's an economic war where there is a desperate need to control. The motivations may be different, depending, but suspect the reasons for embarking on a witchhunt against the global gaming industry is more related to protecting US domestic gaming operations. (It sure has little to do with the welfare of children accessing gaming sites as is claimed)

There is not much chance of the gaming industry shutting up shop because of US domestic laws (and same applies to the adult industry). It is ironic that serveral nations (apart from those in the other frowned-upon offshore area) actually encourage the establishment of gaming operations.

The US is obviously going to lose out in having a share of the global gaming industry. Chances are if there was a change of policy, who would trust a jurisdiction where there is a fickle change of policy - nevermind invest billions.

This saga almost appears as tho the management of the US are living on another planet and with a disabilty leaning towards suicidal tendencies. There are *very* serious economic issues in the US, but, not just with gaming, and parrot fashion pattern of shooting down the prospects of any industry while increasingly living off the national credit card and importing/consuming endlessly from other nations while paying the bill (or extending credit) with weak-valued dollars. Basically unsustainable.

Only my :2 cents: - this is not going to go away and adopting an ostrich stance is not a remedy. Even with it's own recognized "partners", the US is shutting itself into a closet while stamping it's feet with these partners trying to be relevant and demanding information from banks by issuing subpoenas. Little doubts the financial institutions will act as they see fit - and observe the laws of the countries which are applicable - and ingnore the delinquent kid.

Meanwhile... real life rolls on and the SuperBowl next month will be another good trading day for global gaming :winkwink:

Anyone looking for a canadian corporation to sponsor them with a job so they can move up north... Hit me up ;-)

Lord Love A Duck! When is MY Country gona stop screwing with other countries? Haven't we made a big enough ass of ourselves yet?

I think the European High Court and the European Commission on Human Rights might have a word or two to say about this. The protection of individuals w/r to personal data and movement of said is a highly developed and sacred law.


If I remember correctly, the US also tried it with Belgium for somthin or other, but they never got anywhere.

I've always said if they really wanted to get rid of porn online, all they have to do is go after the money by hitting the credit card companies and banking.

Looks like they just did that to online gambling, so how long before it happens to porn?

Doubt it will even get that far borked - it's not exactly something other EU countries (or other nations) are bothering about.

But sure, can see even the UK adopting a change of attitude and institutions there stuffing subpoenas at the bottom of a dusty filing tray. The UK is just one country who has directly opposing views on gaming and an interest in developing this further - and privacy is certainly an issue.

Doubt if it even would be an issue raised in the European Court of Justice - the court does not exist to hear the demands of non-EU states.

Odd you should say that crockett... always been aware of this for years and it's one of the main reasons for staying away from banks and processors within US jurisdiction.

Dunno if you noticed... there has been a gradual shift away from US territory and into other global banking regions where the issue is not a problem. The gaming industry was already set up this way, but see adult going the same way. (We started almost.. 8-9 years ago).

Yea it's not a big deal to set up business off shore and so on. But that does little to help the fact that the worlds largest customer pool has been effectively taken out of the market in regards to online gambling.

It's the customer base that stuff like this will hurt. Sure they can't go after off shore companies unless they can tie you to the US somehow but what difference does that make if they cut your customers by 80%.

BTW in regards to porn I think it would be a bit harder, because porn isn't illegal but gambling is. But I could still see it happening.

This looks ugly. What more can I say, I could go into prediction mode, but I don't see myself much of a psychic. I am interested to see the results of this!!

I don't understand why you say the EU wouldn't get involved just because other countries don't care. The UK government has to abide by European law and as such should consult the ECJ in case of doubt, because if it doesn't, any single user of those betting shops could take the UK govt to court.

Huh? The UK is EU, the companies are EU, therefore is involved nomatter who asks to break the law.

Sure.. this is a biggish lump of client base when the US market is not accessible or not permitted to engage in online gaming - and it has had a dramatic effect already in some companies, especially those who targetted the US market in particular.

The flipside is gaming is legal in most other jurisdictions (and licenses granted) and many gaming operations are doing fine. Mentioned on another thread, one was hit badly on it's US biz, but their offices are still open in central and south America, the EU and Asia (where the latter is doing very strong business).

Some stuff apparently going on in the background now may bring more headlines on the gaming issue shortly, and, hard to say, but could end up having a backlash effect and raising this issue in higher levels of government (outside the US). That, added to the pending WTO judgement is prob going to raise a fuss and widen the goalposts to much more than gaming laws.

Either way, the US is clearly entitled to implement whatever laws it wishes within US territory - and remains to be seen what the net effect would be in relationships globally.

Agree.. porn is "easier", tho the same excuses on gaming could be applied to the adult industry.. ie protection of minors etc. It's easy to throw up excuses for laws based on some moral concerns (and that can exist in almost all nations). Bottom line... it's prob safer to operate in jurisdictions where there is little problem - and these can be other industrialized countries or offshore.

Ah.. What I was saying was that the EU runs their own house and are not too interested in the opinions of states outside the EU. ie If China, the US or Brazil opposed gaming - doubt the EU courts or EU countries would bother.

Actually mean't that it is unlikely the EU Court of Justice would listen to complaints from external states (ie the US).

And sure.. agree the UK would be likely to follow EU directives.

I think we are getting lost along the way somewhere :winkwink: Yes - agree!!

It seems a lot of people will lost their accounts.

Update
 

DOJ Subpoenas Banks on Gambling
U.S. Justice Department investigates role of U.K. investment banks in online gambling.

By Ken Schachter, Red Herring


Online gambling firms are based offshore and their stocks are listed on foreign exchanges, but the United States Department of Justice has reached across the ocean in an effort to rein in the popular online destinations as the Super Bowl?a betting bonanza?approaches.

At least 16 British banks with operations on Wall Street, including HSBC, Dresdner Kleinwort, Credit Suisse, and Deutsche Bank, were served with subpoenas dating back to October, according to The Times of London. The Southern District Court of New York is seeking email and telephone records and other documents.

The move raises the question of how far the U.S. government?s authority extends in regulating the gambling sites, which take bets from U.S. citizens, but whose operations are based in places including Gibraltar, Costa Rica, and Antigua.

Politicians from the United Kingdom voiced outrage about the move.

The Times quoted Alan Duncan, Shadow Trade and Industry Secretary, as saying the Justice Department?s campaign to wield its clout cannot be justified. Vince Cable, a Liberal Democrat, said the extra-territorial action defies ?basic principles of justice.?

Long Arm of the Law

An unnamed banker said the U.S. is targeting banks that help the online gambling companies raise capital in London because it cannot reach the Internet gambling companies directly.

President George W. Bush signed a law in October outlawing Internet gambling, but it is believed that millions of Americans bet online nonetheless (see Snake Eyes for Online Gambling).

Deutsche Bank and Dresdner helped raise money for PartyGaming, the largest Internet gaming company. PartyGaming?s initial public offering in 2005 put the company in the FTSE 100, an index of the largest U.K,-traded stocks (see Poker Site?s IPO Is Huge Hit). HSBC counseled another online gambling firm, 888.com, on its own 2005 IPO (see Big Bets on Online Gambling).

In July, David Carruthers, chief executive of London-based BETonSPORTS, was detained while traveling through the United States (see Feds Deal web Gambling Blow).

BETonSPORTS has abandoned the lucrative U.S. market, as has Neteller, which faces charges in connection with its business handling payments to and from gaming sites (see BETonSPORTS Folds US Hand and Neteller Exit Deals Disarray).

Now I know the significance of your sig http://www.jdorama.com/images/avatar...b0b8461aa2.gif

He's peering into McDonalds and counting the numbers of FBI agents consuming good healthly hamburgers and preparing for "Operation SuperBowl" :1orglaugh

Update:
 

Open Season on HSBC
News that HSBC and other banking institutions have been subpoenaed by the US Justice Department could not have come at a worse possible time for the UK banking giant.

As one negative article about HSBC followed another over the past month, it looked like open season on the British bank, one of the world's biggest, a report in the Herald Tribune suggests.

"The raft of negative articles so worried the London-based bank that it agreed to a couple of interviews with its top executives during the "close" period before it announces full-year results in March, an interval during which it has generally kept a low profile to avoid disclosing too much information and incurring the wrath of regulators."

Now come the potential privacy issues and - to be fair - HSBC has apparently not yet turned over documents to the US Justice Department.

The Register reports that on Friday, the Federal Government issued subpoenas to major European banks, including Credit Suisse and HSBC, demanding copies of all business records, correspondence, and emails related to internet gambling transactions.

"The subpoenas are the latest extraterritorial assault by the American government on foreign institutions involved with online gaming. Earlier in the week, two former executives of NETeller, a British payment processing service, were arrested on money laundering charges in connection with NETeller's online gaming financial transactions, although neither was currently involved with the company in any managerial capacity."

The Herald Tribune, meanwhile, brings up additional concerns over HSBC's image:

"For fund managers who bought the shares or analysts who recommended them, the fact that HSBC was one of the worst-performing bank shares globally in 2006 had something to do with it. And this in turn had a lot to do with the dollar's sharp fall against the pound, as the bank makes 65 percent of its profit in dollars or dollar- linked currencies.

"Additionally, the bank said, investors do not like two uncertainties: not knowing how the bank's U.S. exposure will develop, since that depends on the performance of the U.S. economy, and the picture is now mixed; and not knowing, because it is too early, whether the funds HSBC put into developing its investment bank will yield a significant return."