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Neteller Update Regarding UIGEA

Business, 2006-10-19, by TwoGun

The Unlawful Internet Gambling Enforcement Act (UIGEA) instructs banks and other financial institutions to block payments from Americans that are to be used for "unlawful internet gambling." Due to this law's passage, money transfer service Firepay has already issued a statement saying it will cease processing money transfers from US account holders to online gambling sites.

After the law was passed, Neteller (NLR.L) made an announcement that it was business as usual for the firm. This announcement was different from most publicly traded companies, as the rest had closed their doors to the American market.

Neteller has since announced that it is re-evaluating its position. While it is not based in the United States, it will fully comply with American law. However, it has stated that it will wait for the United States Treasury Department to issue guidelines as to how financial service companies should act in accordance with the UIGEA. Until then, it is business as usual for Neteller.

Neteller's announcement is worthy to note for two reasons. First, Neteller's business model is very different from American banks and financial institutions, so it's questionable how topical the Treasury Department's guidelines will be for Neteller. When a US customer sends money from an American bank to a gambling website, the American bank may or may not know that the money is being sent to a gambling website. Its knowledge would depend on the type of money transfer used. However, Neteller always knows if the money is being sent to a gambling website, since it knows all of its merchants.

Second, if Neteller decides to block money transfers for Americans to online gambling sites, US-facing poker rooms will be devastated. Players, especially Americans, are much more loyal to their deposit/withdrawal option than the poker room at which they play. If someone has a Neteller account, it is very easy to switch poker rooms. However, changing one's standard method of transferring money is much more cumbersome.

Furthermore, Americans that primarily used Neteller will likely be wary of trying a new money transferring service. Since Firepay has already closed its doors to Americans, Neteller is currently the only widely used money transferring service for Americans. Many US players, especially casual ones, will likely just quit playing poker rather than try a new method of transferring money. Americans tend to trust Neteller and Firepay with their money and financial information, though they may not with a new money transfer service.

For non-US customers, Neteller's services will remain business as usual. The only changes that may occur will affect Neteller's American customers.

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