Comment
The prosecution of Full Tilt Poker, Pokerstars and Absolute Poker rolls on with no firm dates set for the trial of either the criminal or the civil forfeiture actions. Some defendants (the payment processors and the Utah banker) remain on bail, no doubt with restrictions on their ability to travel, whilst the founders of the poker operators remain outside the US, apparently untouchable. But is that right or can the US Department of Justice reach out beyond its borders? Peter Wilson, partner at law firm Memery Crystal, takes a look.
ne of the most alarming measures is the ability to forfeit monies in interbank accounts in the US. As a result of the Patriot Act of 2001, if the DOJ wants to seize funds from an internet gam- bling business, but the funds are sitting in, say, a UK bank account, the DOJ can obtain and enforce a seizure order against an equivalent amount of that UK bank’s own money that it has deposited in an interbank account it holds in the US.
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These provisions were used in the case of Soulbury Limited where the US Government was seeking to forfeit some $7m. A warrant was served on the Harris Bank International in New York and the funds were seized from an interbank account held by Royal Bank of Scot- land International (RBSI) at Harris bank. This sum was equivalent to funds held in an RBSI account in Guernsey by nominees on behalf of Soulbury which, in turn, was controlled by an individual who operated gambling web- sites out of Antigua. There is no need for the DOJ to prove any link between RBSI’s own funds seized in the US and the funds of its customer, Soulbury, in the account in RBSI, Guernsey.
What it means is that the funds of any igaming operator, payment processor, or affiliate deposited anywhere in the world are at risk of seizure if they fall foul of US law and their bankers have an interbank account in the US. Another far reaching measure is the ‘120 hour rule’ under which a US bank can be required to provide, within this very short period, information about all cus-
tomer accounts that it administers within the US. The Secretary of the Treasury or the Attorney General can also subpoena a foreign bank with a correspondent account in the US to provide records including those maintained outside the US. If the foreign bank does not comply, its US banker can be forced to close the corre- spondent account or face penalties of up to $10,000 a day until it does so. Knowing this, it is not surprise that the UK banks felt that their assets in the US were under threat and so turned away from supporting US facing igaming following the passing of the Unlawful Internet Gambling Enforcement Act in 2006.
The DOJ can also apply pressure by using the mutual assistance provisions between the US and other coun- tries. For example, if the DOJ considers that there is someone in the UK that it wishes to speak to, it can ask the Serious Fraud Office to use its compulsory interview- ing powers, requiring the individual’s attendance at its offices for a tape recorded interview by US agents who will fly over to conduct it. The interviewee risks commit- ting an offence under UK law if he refuses to answer the agents’ questions. There is no right against self incrimi- nation and, if the interviewee is subsequently prosecuted by the US, he has to rely on the UK’s request that no incriminating statements from that interview are used against him. Ultimately, if it wants to get its man the DOJ can apply for extradition if it has an extradition treaty with the country in which the suspect is located. People in the UK
“In Vegas, I got into a long argument with the man at the roulette wheel over what I considered to be an odd number.”
American comedian Steven Wright Stephen Wright
The long, long, long arm of the law
are in a particularly vulnerable position as a result of the US biased Extradition Treaty between the UK and the US. For extraditions from the US to the UK, the UK authorities must produce evidence to prove a prima facie case before the US Courts are prepared to order an extradition. Not so from the UK to the US. The UK government waived the requirement to supply evidence of the extraditable crime. Undoubtedly, this can result in injustices where the US view of what is criminal, or how harshly it should be pun- ished, can differ markedly from the view in the UK; inter- net gambling being a good example, or consider the case of Gary McKinnon where he faces the risk of decades in gaol in the US for what the US prosecutor called, “the biggest military computer hack of all time” compared to a maximum sentence of two years under the UK’s Com- puter Misuse Act. A request from the US could in theory allege bank fraud and money laundering and side step any difficult issues of proving double criminality in relation to internet gambling.
If a defendant was well informed and decided to keep on the move to try to avoid arrest and subsequent extradi- tion, that may not assist him as the DOJ could ask Interpol to issue a Red Notice meaning that as soon as the defen- dant presented his passport at the border he would be arrested on leaving or entering the country. It is not just the DOJ that has extra jurisdictional tools available to it. Across Europe there has been a conven- tion on mutual assistance in criminal matters since 1959 and with the advent of the European Arrest Warrant it is simple for one Member State to request the arrest of a person it wants in another State, a case in point being the arrest in the Netherlands in 2007 of Petter Nylander, the CEO of Unibet, on a warrant issued by the French authorities. There are very few arguments one can use successfully to resist extradition as discovered by Julian Assange who is on his last appeal to the Supreme Court to try to avoid being returned to Sweden on a European Arrest Warrant.
Businesses in the igaming sector know very well that is not enough just to comply with the laws of the country in which your business is domiciled. What may be surprising is just how far some countries, the US being the most extreme example, can reach beyond their national borders. No doubt it is an issue to which the Full Tilt Poker, Pokerstars, and Absolute Poker are very much alive. It is also something that will become increasingly important in Europe as we inch towards a new system of national licensing regimes. If the UK experience is any- thing to go by, once the new licensing regimes bed in, enforcement against non compliers follows next.
This article is not intended to constitute legal advice and is merely general comment that may not apply to your circum- stances; therefore, you should formally engage the assis- tance of a lawyer for advice before taking any personal or business decisions in relation to the above matters.
Never too late to turn back H
enry Ford suggested: “A business absolutely devoted to service will have only one
worry about profits. They will be embarrassingly large.”
Sometimes, either as punters or bookmakers we repeat practices that deep down we know are bad for us individually or for our business but ‘we have always done it that way’. Bookmakers’ marketing personnel sometimes rabbit on about ‘maximising long-term customer value’ while actively engaging in practices that actually damage customer value.
64 BettingBusinessInteractive • JANUARY 2012
They do this: • by giving large incentives to new customers which annoys existing customers and thus encouraging account churn, • also encouraging a high attrition rate of customers by failing to reward customer loyalty - with the honourable exception of Paddy Power Price-setters frequently
repeatedly upset customers: • by invoking ‘palpable error’ rather than rooting out their own pricing and price publishing errors, • by limiting or banning
winning customers rather than learning to profit from winning customers. • by controlling flagged customers with a significant increase in costs per unit stake. Price-setting managers of some bookies seem to waste much senior management effort and expensive legal advice as well as undermining the reputation of their business. They do this by taking a hard-line on disputes - especially those relating to palpable error. IBAS repeatedly complain - in public - about bookies taking a very hard
Retired business consultant Ric Ingram suggests that it’s time for bookmakers to change some heavily ingrained business practices for the greater good.
line and then capitulating at the last minute to avoid court action. This is the characteristic behaviour of a bully who holds their customers, IBAS and their own shareholders in contempt. Are you sure that ‘we have always done it this way’ or ‘all our competitors do the same’ are sufficient reasons to continue in behaviours that are so cynical and unfriendly to your main source of profits - your customers? Overcoming long-standing bad practices is not simple – it might even include letting go some managers and staff who ‘do not
get it’. But such change has a high reward in terms of both repeating profits and staff morale. These costs and benefits are fully within the scope of interest of every member of every bookies board of directors. There is a Turkish proverb that goes: “No matter how far you’ve gone down the wrong road, turn back.”
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