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Hearing of the House Financial Services Committee's Domestic and International Monetary Policy, Trade and Technology Subcommittee: Proposed Regulation to the Unlawful Internet Gambling Enforcement Act (UIGEA)

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Location: Washington, DC


Hearing of the House Financial Services Committee's Domestic and International Monetary Policy, Trade and Technology Subcommittee: Proposed Regulation to the Unlawful Internet Gambling Enforcement Act (UIGEA)

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REP. BRAD SHERMAN (D-CA): Thank you. I know the gentleman from Texas is dedicated not only to individual liberty but also states rights. And gambling has traditionally been regulated by the states. It is not a decision of Congress.

But technology that has undermined that regulation, and it is the attempt of the law that we are dealing with today to restore what has been a traditional province of the states.

I'm sure the gentleman from Texas would agree more with the decision of the state legislature in Carson City than perhaps the state legislature of his own state with regard to whether gambling should be allowed.

The credit card system has been using a coding system to block restricted payments for Internet gambling. I wonder if the witnesses could respond to why this same system wouldn't work for other payment systems.

MS. ROSEMAN: I think it's really a very different design for the card systems versus other systems. The way the card systems have been designed, excuse me, is to include a code going along with the authorization that indicates what type of merchant the transaction took place at, whether it's a restaurant, a gaming transaction, or airplane tickets or whatever.

If you look at, for example, the check system, there is no code and really the way the check system is set up no capability to have such a code put in. And so I think that would be very difficult to extend that concept that's in the credit card system to things like the check system or wire transfer systems.

REP. SHERMAN: That's a very concise and good answer, I thank you.

One of the serious concerns related to Internet gambling is money laundering. Why wouldn't the same procedures used to combat money laundering and terrorist financing work to address illegal Internet gambling?

MS. ROSEMAN: I think the problem is money laundering is a global concern. Banks around the world focus on this as an issue. If you look at Internet gambling, a large number of Internet gambling businesses are not in the United States. Most of them are offshore in countries that this is a perfectly permissible activity. So the banking industries in those countries have no incentive to be able to flag those particular transactions, because they are just legitimate commercial transactions.

REP. SHERMAN: So we would be in the position of either allowing Internet gambling or cutting our financial ties to those small Caribbean countries if we thought that was more important?

MS. ROSEMAN: And I think it goes beyond just small Caribbean countries. There conceivably could be Internet gambling activity in other countries going through major correspondent banks where it would just be impractical for U.S. correspondents here to cut off those relationships that have so much international payment flow going through them.

REP. SHERMAN: What is the largest country economically that allows Internet gambling and that demands that U.S. citizens be allowed to gamble over the Internet is the site is located in their country?

MS. ROSEMAN: That I do not know off the top of my head, I'm sorry.

REP. SHERMAN: I yield back.

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