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US deals foreign banks gaming blow

Subpoenas cause a stir

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House of Cards Only days after two former executives of an Isle of Man based online payment service were arrested on money laundering charges, the American government dealt another black eye to the European financial services industry.

On Friday, the Federal Government issued subpoenas to major European banks, including Credit Suisse and HSBC, demanding copies of all business records, correspondence, and emails related to internet gambling transactions.

The subpoenas are the latest extraterritorial assault by the American government on foreign institutions involved with online gaming. Earlier in the week, two former executives of NETeller, a British payment processing service, were arrested on money laundering charges in connection with NETeller's online gaming financial transactions, although neither was currently involved with the company in any managerial capacity.

The fact that neither of them were currently involved with NETeller deepened the paranoia among those involved in the online gaming industry, even among those whose companies are no longer soliciting business in the American market, as the arrests concerned transactions dating back to 2005 when the status of American law on online gaming was still in question.

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It raises the possibility of widespread American criminal charges against anyone who has ever been involved with the online gaming industry, even if in a peripheral way.

After all, banks such as Credit Suisse that underwrote initial public offerings for online gambling companies are not necesarily those that have been processing retail transactions for the online gambling industry. This means companies previously considered safe from American bullying must now see themselves at risk - regardless of where they are headquartered.

It gets worse. Since indictments may remain sealed under American law, anyone in a decision-making capacity with any investment bank that has involved itself with what the Department of Justice (DoJ) described last week as a "massive criminal enterprise" should be particularly careful about travelling in any American jurisdiction, including places such as the American Virgin Islands or American Samoa that are involved with offshore banking.

Stephen Lawrence, a Canadian citizen and former CEO of NETeller (who has held no managerial position whatsoever for over a year), got snapped up by American authorities last week in the American Virgin Islands. The FBI grabbed the other former exeuctive, the guitar strumming lawyer turned philanthropist John Lefevbre, at his home in Malibu, California.

Apparently, the former NETeller execs had been the target of an FBI probe since June 2006, which means the money laundering allegations thrown at them pre-date the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA).

Maybe the former executives were only the low hanging fruit due to their proximity to American justice, but one shudders to think what the American government intends to do once the 270 day waiting period ends before the UIGEA takes effect.

Although the arrests of the former NETeller executives shocked the gaming industry, the almost unlimited scope of the American subpoenas proved even more jaw dropping. After the arrests, NETeller almost immediately ceased accepting payments from American citizens, providing a link on its website offering instructions on how to withdraw whatever funds currently resided in those accounts.

A Canadian rival, ESI Entertainment's Citadel processing system, also ceased collecting payments from Americans in the aftermath of the arrests. However, NETeller PLC was not formally charged with anything, leading many to wonder when the other show would drop. Drop it did, but nobody expected anything of this magnitude.

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