FATF Condemned As 'Toothless Poodle' Over Internet Gaming

by Amanda Banks, Tax-News.com, London

30 August 2001

Speaking at a seminar in the Bahamas recently, US based attorney and international money laundering expert Bruce Zagaris claimed that although the Financial Action Task Force had been partially effective in achieving its anti-money laundering aims, not enough had been done in the area of internet gaming, leaving the organisation as ineffective as a 'toothless poodle'.

Mr Zagaris later reiterated this point in an interview with the Bahama Journal, observing that: 'The current global unregulated internet gaming provides opportunities for laundering money at levels that may exceed the volume achieved in prior cross border flows and the FATF may not have the bite to stop the flow of laundered money in this form.'

Mr Zagaris gave a paper entitled 'Internet Regulation and the Enforcement of Internet Gaming' at the conference, in which he predicted that despite a potential ban in the US, the market for gambling on the internet could grow to more than $3 billion by next year.

The problem, suggested the attorney, was that a lack of regulatory coherence on an international level was putting financial institutions, intermediaries, and gamblers themselves in an untenable and confusing position. The governments of different countries treat online gambling in disparate ways, he explained, with some permitting it and allowing it to bring in government revenue, and others criminalising and prohibiting certain types of gaming. 'In an interconnected world, the disparate treatment of gaming activities means that gaming operators, access providers, banks and financial intermediaries and gamblers are increasingly caught between legal obligations,' he observed.

Mr Zagaris added that this disparity was further compounded by the fact that some governments provide incentives for foreign investors to establish internet gaming and related financial service providers in their jurisdiction. He called for the 'lag' between technological innovation and regulatory enforcement to be addressed, and suggested the need for an internationally coherent policy on the subject.

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