U.S. Cracks Down on Poker Sites – The New York Times u s anti money laundering laws

In an aggressive attack on internet gambling, federal prosecutors on friday unsealed fraud and money laundering charges against operators of three of the most popular online poker sites. The government also seized the internet addresses of the sites, a new enforcement tactic that effectively shuttered their doors.

Prosecutors charged that the operators of full tilt poker, pokerstars and absolute poker tricked banks into processing billions of dollars in payments from customers in the united states. They said the actions violated a federal law passed in 2006 that prohibits illegal internet gambling operations from accepting payments.

The sites have their headquarters in places where online gambling is legal — antigua and the isle of man — a hurdle that has made it difficult for authorities in the united states to crack down on the industry.

The indictment shows the intensifying game of cat-and-mouse between prosecutors and gambling sites that generate billions of dollars in transactions.U s anti money laundering laws

The online poker operators sought to avoid detection by banks and legal authorities by funneling payments through fictitious online businesses that purported to sell jewelry, golf balls and other items, according to the indictment. It says that when some banks processed the payments, they were unaware of the real nature of the business, but the site operators also bribed banks into accepting the payments.

The home page of pokerstars.Com, which faces fraud and money laundering charges.

Lawrence walters, a lawyer who represents online gambling operations, though not those involved in these cases, said the indictment might raise an even more fundamental question: is online poker actually illegal? Federal law prohibits sports betting, but experts are divided over whether it clearly prohibits online games like poker and blackjack.

In the indictment, prosecutors seemed to skirt the issue.U s anti money laundering laws they based parts of their prosecution on state laws in new york and elsewhere that prohibited unlicensed gambling, including poker. Legal experts said the prosecutors needed to rely on such prohibitions as a foundation for going after the claims of money laundering and fraud. But mr. Walters said this strategy might face challenges. He said it was not clear that the state laws applied to foreign-based gambling operations, given that under federal law, international commerce was regulated at the federal level.

“this appears to be a precedent-setting case,” mr. Walters said. “it will be the first time the department of justice takes on the looming question of whether federal law prohibits online poker.”

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On friday, visitors to those sites were met with a message that begins: “this domain name has been seized by the F.B.I.” the government used the same controversial tactic of seizing domain names in actions last year against sites accused of copyright violations.U s anti money laundering laws losing a domain name can be costly for a company that has invested in promoting it as the main route to its site. But the tactic can also be of only temporary effectiveness, because the company can switch to a new web address that is outside the reach of law enforcement in the united states — one that, for example, does not end in .Com.

According to the indictment, the fraud and money laundering scheme evolved from deception to bribery. Initially, after the enactment of the 2006 law aimed at limiting payment processing for online gambling, the defendants sought to dupe banks by creating fake companies, according to the indictment.

But the indictment says that as financial institutions got wise to those efforts, several defendants sough to persuade smaller banks to process the transactions by making multimillion-dollar investments in them.