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Survey of Electronic Cash, Electronic Banking, and Internet Gaming

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Survey of Electronic Cash, Electronic Banking, and Internet Gaming A Survey of Electronic Cash, Electronic Banking and Internet Gaming 1 2 TABLE OF CONTENTS PREFACE ..........................................................................................................................5 FOREWORD ..........................................................................................................................7 INTRODUCTION ............................................................................................................... 11 ELECTRONIC CASH .......................................................................................................... 15 INTRODUCTION ................................................................................................... 15 SMART CARDS/STORED VALUE CARDS........................................................ 15 The Basics ..................................................................................................... 15 Stored-Value Card Issuers ............................................................................ 16 COMPUTER E-CASH ............................................................................................ 19 The Basics ..................................................................................................... 19 E-Cash Issuers ............................................................................................... 19 REGULATORY POLICY......................................................................................... 20 SUMMARY OF ELECTRONIC CASH IN THE NEAR TERM ......................... 22 ELECTRONIC BANKING .................................................................................................. 25 INTRODUCTION ................................................................................................... 25 TECHNOLOGY ....................................................................................................... 26 Security.......................................................................................................... 26 Opening an Account .................................................................................... 26 GROWTH................................................................................................................. 27 Internet Banking Websites and Growth...................................................... 27 Cost of Services ............................................................................................ 30 REGULATORY OVERSIGHT................................................................................ 31 Financial Crimes Enforcement Network (FinCEN) .................................. 31 Federal Financial Institutions Examination Council ................................. 32 Federal Reserve System ................................................................................ 33 Federal Deposit Insurance Corporation ...................................................... 33 Office of the Comptroller of the Currency ................................................. 34 Office of Thrift Supervision ......................................................................... 35 National Credit Union Administration ...................................................... 35 Recent Regulatory Developments ............................................................... 35 CRIMINAL ACTIVITIES ....................................................................................... 36 PROSPECTS ............................................................................................................. 37 INTERNET GAMING ......................................................................................................... 39 INTRODUCTION ................................................................................................... 39 COMMERCIAL DEVELOPMENT TRENDS ....................................................... 39 A Survey of Electronic Cash, Electronic Banking and Internet Gaming 3 Participants ................................................................................................... 40 Growth .......................................................................................................... 40 Site Location ................................................................................................. 41 FINANCIAL OPERATIONS .................................................................................. 41 GAMING WEBSITES.............................................................................................. 42 Design and Structure.................................................................................... 42 Legal Issues.................................................................................................... 42 Licensing Questions ..................................................................................... 43 Site Security and Transactions..................................................................... 43 DEVELOPMENTS IN THE UNITED STATES.................................................... 44 Federal Legislation........................................................................................ 44 FinCEN Survey of State Legislation............................................................ 45 Federal Civil and Criminal Cases ................................................................ 46 Indian Gaming Regulatory Act ....................................................... 46 State Civil and Criminal Cases.................................................................... 47 Florida ............................................................................................... 47 Indiana .............................................................................................. 48 Maryland........................................................................................... 48 Minnesota ......................................................................................... 48 Missouri ............................................................................................ 49 New York .......................................................................................... 49 Wisconsin ......................................................................................... 49 Private Lawsuits ............................................................................................ 50 The Interactive Gaming Council ................................................................ 51 CONCLUSION ........................................................................................................ 51 APPENDICES ....................................................................................................................... 53 Appendix A. SMART CARD TECHNOLOGY AND SECURITY.................... 55 Appendix B. INTERNATIONAL REGULATION OF ELECTRONIC CASH ..... 59 Appendix C. LEADING U.S. INTERNET BANKS ............................................. 61 Appendix D. A SAMPLE OF INTERNATIONAL INTERNET BANKS AND WEBSITES, FEBRUARY 2000 .......................................... 63 Appendix E. INTERNET BANKING AROUND THE WORLD ...................... 67 Appendix F. INTERNATIONAL REGULATION OF ELECTRONIC BANKING ....................................................................................... 71 Appendix G. INTERNET GAMING REGULATORY POLICY AROUND THE WORLD .................................................................................. 73 Appendix H. INTERNET CASINOS AND SPORTSBOOKS .......................... 81 Appendix I. COMPANIES RELATED TO INTERNET GAMING OPERATIONS ................................................................................ 97 SOURCES ............................................................................................................................. 99 ENDNOTES ........................................................................................................................ 107 4 PREFACE ince 1995, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) Shas been examining the potential regulatory and law enforcement implications of emerging technology-driven payment mechanisms, such as smart card and Internet-based electronic cash, electronic banking, and Internet gaming. This initiative was undertaken within the context of FinCEN’s mission to support and strengthen domestic and international anti- money laundering efforts. By developing and maintaining an understanding of how these products work and the role they play within the financial system, FinCEN is better able to make informed judgments with regard to the development of effective anti-money laundering controls. In our pursuit of this goal, we work closely with other U.S. government authorities and maintain a dialogue with key members of the financial services industry. FinCEN’s practice is to formulate strategies and programs that minimize the risk of money laundering and other financial crimes, without inhibiting the continued growth of these new payment systems. In order to share with others some of the findings that have resulted from our efforts in this area, FinCEN has produced this report on Electronic Cash, Electronic Banking, and Internet Gaming. The report addresses key commercial developments with regard to these three components of electronic commerce, as well as associated regulatory issues and noteworthy law enforcement actions. Your comments regarding the content and usefulness of this report are welcome. Any comments or questions may be directed to Shaun W. Lonergan, Special Assistant
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