US Government Nets Another $13.3 Million From Online Gambling

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The US government has shied away from going after online gambling companies when it comes to violations of US law. Instead, the government has focused their efforts on investigating the payment processors that aid these gaming sites in their operations.

Ahmad Khawaja ran two payment processors that were in the middle of a federal case involving online gambling funds. This week, Khawaja forfeited $13.3 million that was seized by the FBI back in June of last year. The civil settlement kept Khawaja and his companies from further legal trouble.

Allied Wallet and Allied Systems processed funds that went into player accounts from sites such as PokerStars and other online gaming sites. The companies also transferred money from offshore through wire transfers from people who understood that the money was being exchanged as part of the gambling operation.

The laws in the US are vague when it comes to the legality of Internet gambling. The Unlawful Internet Gambling Enforcement Act was created in 2006 and went into affect this June. The UIGEA, however, does not define what activity constitutes illegal gambling. Sports betting is the only defined illegal form of gambling on the Internet in the US.

The purpose of the UIGEA was to place the burden on the financial institutions to decline transactions that are marked as gambling transactions. The problem, according to the financial industry, is that most of transactions coming from online gambling sites are marked as something other than gaming.

The government has not actively gone after online gambling sites since the UIGEA went into affect. They have instead focused their efforts on the payment processors that are aiding in completing the financial transactions. PokerStars does not believe they are operating illegally in the US, and they did not support Khawaja and his processing company's when the agreement was reached with the government.

"PokerStars does not condone efforts by processors to conceal the nature or purpose of funds used to play online poker. PokerStars has taken steps to ensure that processors properly disclose the nature of their business to their relevant financial institutions," said PokerStars, in a statement.

This forfeiture comes at a bad time for PokerStars. Last month, the House Financial Services Committee passed legislation proposed by Representative Barney Frank that would overturn the UIGEA and lay the framework for a regulated online gambling industry in the US.

One of the amendments added to the legislation during the markup phase was that any company that is in violation of current US laws would be prohibited from receiving an online gaming license if the laws change. PokerStars and Full Tilt Poker are two of the companies that industry insiders believe that amendment was targeting.

August 18, 2010
Posted By Larry Rutherford
Staff Editor, CasinoGamblingWeb.com
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