The Federal Reserve, OCC and OTS have issued interagency guidance for compliance with the regulations that implement the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The interagency guidance released on May 20 reminds financial institutions that the regulations require participants in five designated payment systems to establish policies and procedures that are “reasonably designed to identify and block or otherwise prevent or prohibit” transactions related to unlawful Internet gambling. Compliance with the UIGEA regulations is required by June 1. The five designated payment systems are the automated clearing house (ACH) systems, payment card systems, check collection systems, money transmitting businesses and wire transfer systems. The interagency examination guidance includes an overview of the UIGEA regulations, applicable exemptions and safe harbors for compliance. The regulations generally exempt all participants in each designated payment system from the requirement to have policies and procedures in place unless the participant is specifically listed as “non-exempt.” The beneficiary’s bank for wire transfers and the depositary bank for check collections are non-exempt, so such banks must have UIGEA-compliant policies and procedures in place by June 1.
Nutter Notes: The UIGEA regulations require all non-exempt participants in each designated payment system to establish and implement policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions. Non-exempt participants are permitted to design and implement policies and procedures tailored to their operations and may use different policies and procedures with respect to different business lines. The UIGEA regulations provide models of reasonably designed policies and procedures that would meet the requirements of the rule for each designated payment system. While these model policies and procedures are not the exclusive means of compliance, use of the models will provide a safe harbor for purposes of regulatory compliance. Beneficiaries’ banks and depositary banks will be considered in compliance with the regulations if their policies and procedures apply appropriate due diligence procedures to commercial accounts or relationships and provide notice to all commercial accountholders of the prohibition on conducting restricted transactions, apply such due diligence requirements if the bank has actual knowledge that a commercial customer engages in an Internet gambling business, and address instances in which the bank has actual knowledge of restricted transactions.