SUMMARY: 

On November 12, 2008, the Board of Governors of the Federal Reserve and the Department of Treasury (“Agencies”) issued the final rule regarding Prohibition on Funding of Unlawful Internet Gambling.  A copy of the final rule is attached.  The final rule has an effective date of January 19, 2009, but mandatory compliance is not required until December 1, 2009. 
 

NACHA staff is preparing a thorough analysis of the final rule’s impact on the ACH Network, and on the NACHA Operating Rules.  A preliminary analysis shows that the majority of issues NACHA raised in its comment letter were addressed satisfactorily.  For example, the final rule:

• Adopts the “actual knowledge” standard requested by NACHA for the remedial action provisions of Section ___.6;
• Preserves the overblocking provisions of the proposed rule; and
• Maintains the provision allowing participants in designated payment systems to decide for themselves whether or not to process lawful gambling transactions. 

The Agencies predict the combined recordkeeping burden will be approximately $88.5 million, with the majority of the costs being absorbed in the first year.
 

Legislative Action:  Shortly before the issuance of the final rule, Congressman Barney Frank (D-MA) sent a letter to the Department of Treasury urging it not to issue the final rule at this time stating, "This midnight rulemaking will tie the hands of the new Administration, burden the financial services industry at a time of economic crisis, and contradict the stated intent of the Financial Services Committee."  The House Financial Services Committee passed legislation in September that would block implementation of the new regulations, but neither the full House nor the Senate has voted on the measure.
 

Impact on NACHA Rulemaking:  NACHA’s Rules and Operations Committee has established a Rules Work Group to review the regulations and recommend whether any conforming changes to the NACHA Operating Rules will be necessary.  The Rules Work Group will begin meeting next week, and outside counsel is reviewing the rule specifically for the purpose of assessing its interplay with the NACHA Operating Rules.

Download document - "Prohibition on Funding of Unlawful Internet Gambling"  (121 Pages)