Financial Institutions Oppose I-Gaming Transaction Ban in Australia

MasterCard International and banking industry groups are lobbying to prevent Australia's government from broadening the Interactive Gambling Act (IGA) to include laws making it mandatory for banks and credit card companies to block card use for illegal online gaming transactions.

As part of a mandatory review of the IGA, the Department of Communications, Information Technology and the Arts asked for submissions from the industry to get a wide range of ideas and opinions on the best approach for dealing with the interactive gaming industry in Australia.

A subsection of the Act, 69A, allows the government to make regulations that would essentially cut off the payment systems that are used for illegal online gaming transactions.

One possibility would have the onus on credit card companies; another approach would put the responsibility on the issuing banks. Both MasterCard and the Australian Bankers Association (ABA) say that putting such a system into place would cost too much money for their members to institute.

In its submission to the DCITA, the ABA said that Australians spent $4 million in three months on 32,000 online gambling transactions, paid with Visa cards alone.

Under the IGA, it is illegal to provide online gambling (with the exception of some sports and racing services) to Australians.

Trying to determine what is legal and illegal would be an arduous task and expensive for whichever industry was forced to burden the cost, the ABA and MasterCard argue.

Government officials have mentioned they would like to "take reasonable steps" to force banks to dishonor credit-card payments on illegal overseas gambling sites. To date, banks have not been required to do so.

Similar "regulatory" approaches are being considered in the United States as well. The House of Representatives could vote by month's end on a bill that would ban credit-card payments and other banking instruments from being used for online gambling.

The ABA argued in its submission that it was "neither feasible nor appropriate" for banks to enforce the ban on online gambling, or bear its cost.

"It is the ABA's view that the burden of prevention of illegal interactive gambling and of related problem gambling outcomes should not fall on banks," the association said.

Additionally, the association feels it would be ill advised for the government to try and ban credit card transaction because players could easily usurp the ban by using electronic payment systems that aren't linked to gambling transactions.

Another possible approach is for the government to rule that gambling debts can't be legally enforced. The ABA said that if that happens, its members would be left holding the bag and forced to absorb the cost.

In its submission, MasterCard suggested that banks should be forced to utilize blocking technology to prevent illegal Internet gambling.

Like the ABA, though, MasterCard said gambling debts shouldn't be deemed unenforceable. Players knowing that they don't have to pay their debt, MasterCard officials said, would only contribute to increased online gambling.

Visa and MasterCard currently require their merchants to flag all gambling activity with the "7995" code.

The coding system is an international standard, and it would be nearly impossible, according to credit card company officials, to introduce a new code because of Australian law. Changes would have to be implemented on a worldwide scale, and there's no guarantee that a system would be able to differentiate between legal and illegal online gambling transactions; the same transaction could be legal in one place and illegal in another.

The ABA said that in the last three months of 2002, Visa cards were used more than 32,000 times for online gambling transactions, both legal and illegal. Those transactions amounted to $4 million, less than 0.03 percent of the all Australian credit-card transactions during the same period.

A host of other industry groups have weighed in on the subject as well. The Australian Bookmakers Association agreed with the banking industry in its submission, arguing that a new credit-card code could be used to stop illegal gambling activities from being charged to credit cards.

The Australian Casino Association, meanwhile, recommended that the best way to control identity theft, underage gambling and money laundering is monitoring who is using credit cards and how they are being used. The ACA recommended that Internet gambling be a fully regulated industry in Australia.

Submissions:

MasterCard
The Australian Bankers Association