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Mastercard cuts off online gambling transactions

By Steven A., Mar 30th 2010
MasterCard is no longer interested in processing any online gambling-related payments in the United States, a move that many expected, as the Unlawful Internet Gaming Enforcement Act (UIGEA) is soon slated to come into effect. The UIGEA is designed to prohibit United States banks from processing transactions where the money goes to an internet gambling site, and MasterCard seemed to have no problem falling into line, even though the law has not to be enforced just yet. This action has the potential to be a huge blow to the online casino industry, and the effects are being felt already by poker, casino and sportsbook websites who do business with U.S. customers.

Something that might have had an effect on the MasterCard decision was the recent upholding of contempt charges involving a Canadian businessman, Douglas Rennick, who was indicted last August for a number of alleged crimes related to internet gaming, and did not comply with a grand jury subpoena that had been issued for him.

Rennick is charged with bank fraud, resulting from his alleged actions in processing more than $350 million for internet gambling companies, through U.S. banks, informing those particular banks that they would be used for other purposes, presumably in order to skirt the UIGEA, which would soon make it illegal for banks to facilitate those transactions.

Rennick was charged with: conspiracy to commit bank fraud, conspiracy to engage in money laundering, and conspiracy to operate an illegal gambling business. If he's found guilty, he faces a maximum of 30 years in prison as well as a substantial amount in fines. The U.S. authorities are also seeking for the forfeiture of over $565 million, which they assert was the amount of money obtained as a result of "illegal gambling and bank fraud conspiracies."

MasterCard's decision severely affected online poker players, many of whom experienced a major problem in processing transactions and getting paid.

According to sources, many players who have tried to transact using MasterCard have been billed, while the online gaming company they were trying to pay doesn't get the funds, meaning that money was intercepted or frozen. Some other customers have not had a problem using their MasterCard, at least for the time being, and that may be because some banks have not really followed through on red-flagging the transactions. There is no doubt, however, that MasterCard is out.

MasterCard has not necessarily been morally opposed to gambling, but they did notice that certain transactions had used codes that were purposely falsified ("bounced" would be a common term) to look like other types of transactions, and this often occurred after the customer had been declined for the transaction using the code for gambling transactions. Reports are that MasterCard actually audited tens of thousands of transactions, and did it manually, to come to its conclusions, and then took steps to close the account of any processor who was part of that kind of deception.

Because MasterCard was an easy and well-known deposit method, it might be some time before the industry is able to catch up. Gaming companies that cater to U.S. customers are trying to encourage the use of electronic wallets on the part of their players, and there is talk of new processors emerging, offering optimism that this problem can be addressed successfully as time progresses. However, this will not happen overnight, and with the UIGEA coming, many in the business feel that a period of great turbulence lies ahead.

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