Neteller Announces US Pull-Out

by Leroy Baker, Tax-News.com, New York

23 January 2007

Following the arrest of two of the company's founders last week, Isle of Man-based online payment services company Neteller has announced that the group will cease processing online transactions related to gambling for the US market.

Neteller has said that as of 18 January 2007, US customers were no longer able to transfer funds using its services to or from any online gambling site. The company's board made this decision in the light of the passing of the Unlawful Internet Gaming Enforcement Act of 2006 (UIGEA) by Congress last year, and the attendant uncertainties and likely delays relating to the drafting and implementing of regulations.

"This announcement reflects the culmination of a series of deliberations and steps the Group has taken since the passing of the UIGEA in October 2006," the company said in a statement.

"Previous steps have included the development of country-blocking and instant funds transfer restriction enhancements to the Group's software platform," it explained.

Neteller said that customer funds, including those of US residents, are held in "fully secure" segregated trust accounts and will be available for withdrawal by customers on demand. US customers continue to be able to use their 'e-wallet' accounts for non-gambling transactions.

According to Neteller, this move will allow the group to focus on opportunities available in the growing markets of Europe, Asia and the Americas outside of the United States.

On 16 January, shares in the company were temporarily suspended pending clarification of the situation surrounding the detention, by US authorities, of Stephen Lawrence and John Lefebvre, two founder shareholders and former directors of the company.

The US Attorney's office in the Southern District of New York has charged Lawrence and Lefebvre with conspiring to transfer funds with the intent to promote illegal gambling. The federal authorities allege that Neteller's involvement in handling financial transactions between gambling customers in the United States and numerous offshore online gaming businesses constitutes illegal conduct. In 2005, it is said that Neteller processed over $7.3 billion in financial transactions, and prosecutors alleged that 95% of the firm's revenue was derived from money transfers involving internet gambling companies.

Neteller stated that the group is "actively assessing" what further steps it may take in light of the two arrests. Meanwhile, the company's shares, which are listed on the London Stock Exchange, will remain suspended.

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