The Financial Services Roundtable said it was "very concerned" that adoption of the rules could impose "significant" and costly compliance burdens on banks. "The statute and the proposed rule expand the role of financial institutions to police laws that are more appropriate for law enforcement agencies," the Roundtable said in a report to the Treasury and Federal Reserve.
In comments filed with the government, Bank of America, a member of the roundtable, also said the U.S. should provide a list of entities with whom banks are forbidden to take payments in the absence of an "unambiguous" definition of what is legal. "Without a definition, financial institutions will be forced to block legitimate transactions in order to avoid the possibility of permitting an illegal transaction," the bank said.
The critiques raise new concerns about whether regulators will be able to enforce a law that, in effect, requires banks and other institutions to know the purpose and legality of payments for one particular industry - online gambling.
The rules require U.S. financial companies with designated payments systems to have policies and procedures that are "reasonably designed" to prevent payments being made to online gambling businesses. According to the U.S. Treasury, online gambling consists of any bet or wager involving the Internet.
The Roundtable said the fact is that it is far from clear whether banks would also have to block payments from American gambling sites, including sites that take bets on horses.
The established horse-betting sites have never been prosecuted. The horse-betting industry maintains that state laws allowing wagers on horses trump federal laws.
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