February 22, 2010
-
News: Crackdown on Internet Gambling
At the onset of the online gambling arena, credit card giants Visa and MasterCard started to block gambling transaction in response to a series of lawsuits. Banks that issued credit cards with Visa and MasterCard's logo received a great deal of criticism and were accused of encouraging gambling addiction and contributing to the illegal offshore gambling industry. Both credit card giants started blocking gambling transactions. However, electronic payment processing companies found a loophole that allowed them to scoot around the blockade by simply changing the transaction code.
Recently, MasterCard reinstituted its stand against online gambling when it announced it would begin to crack down on companies accepting gambling credit card transactions. Through an investigation into the case against Canadian Douglas Rennick who had been a major offender of processing gambling transactions, MasterCard was able to uncover how the companies were able to change the transaction codes. Now just two weeks later, Visa has followed MasterCard's lead by also announcing that they will be cracking down on companies who process gambling credit card transactions. It is estimated that the online gambling business brings in over $12 billion a year.
Neither MasterCard nor Visa provided an explanation as to what prompted the action; however because of its timing, it is speculated that the credit card giants are taking a proactive stance in anticipation of the U.S. Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The UIGEA which was released on November 12, 2008, prohibits the transfer of money from financial institutions to illegal online gambling sites. The final provisions of the act were to become effective in December 2009, however, were delayed a year to give the “non-exempt participants” the time to implement the necessary safeguards and procedure. The act which now becomes effective on December 1, 2010, will make online gambling illegal in the U.S. The action will most likely bring another wave of law dodging criminals to the surface with new ways to get around the law.