Payments News with Legal Ramifications

Week of May 4th - May 8th

Anti-Money Laundering (AML) Compliance — United States


The Financial Action Task Force (FATF) recently released a white paper on the vulnerabilities of casinos and the gaming industry.  (click graphic on left to enlarge)

This APG/FATF report considers casinos with a physical presence and discusses related money laundering and terrorist financing methods, vulnerabilities, indicators to aid detection and deterrence and international information exchange. The report considers vulnerabilities from gaps in domestic implementation of anti-money laundering/ combating the financing of terrorism measures. Online gaming and illegal gambling are beyond the scope of the linked study. The report is 1.20 MB pdf and requires Adobe Acrobat to view. There is a special section that covers credit and debit card usage.  I will follow up with a post regarding that section later today...


Anti-Money Laundering Compliance — International
Canadian regulators have stated that financial services firms should maintain their efforts to fight money laundering despite the global recession and intense pressure to reduce expenses, according to an linked article on Investment Executive.


An article at ThisDay reports that the Bank of Tanzania lacks adequate strategies to combat terrorist funding and money laundering activities despite the existence of laws expressly prohibiting such activities in the country.

A French magistrate has recently opened an investigation against the leaders of Gabon, the Republic of Congo and Equatorial Guinea, in relation to a complaint filed by Transparency International, an international watchdog group, regarding investment derived from embezzled funds in property and other goods located in France. Apparently this has given Transparency the legitimacy it needs in order to press other claims against corrupt leaders, wherever they may be in the world.

Asset Forfeiture Watch reports that the U.S. Department of State has released its Country Reports on Terrorism for the year 2008. The overview which was made public last week praised Mexico’s President Felipe Calderón Hinojosa and his administration for demonstrating “an unprecedented commitment to address national security concerns” but criticized Mexico’s recent terrorist financing law for its lack of asset forfeiture provisions.
Identity Theft and Data Security

A feature article on Dark Reading demonstrates how researchers were able to hijack a notorious botnet in January for about 10 days, only to discover that it was even more dangerous than previously thought.

On May 5, 2009, the U.S. Government Accountability Office released a report on cyber threats and vulnerabilities that place federal systems at risk. This was in response to testimony before the Subcommittee on Government Management,
Organization and Procurement of the House Committee on Oversight and Government Reform.

MX Logic has released a new report that alleges the probability that Waledac and Conficker are working together to create a megabotnet, one that will contain tens or hundreds of millions of infected computers worldwide.

An organization that develops technical standards for the financial industry is working to develop a standard for protecting sensitive payment card data in transit as it moves from the point of sale terminal to the payment processor, according to this article on SearchFinancialSecurity.com. The organization in question, Accredited Standards Committee X9 Inc. is based in Annapolis, Maryland and is accredited by the American National Standards Institute. It has developed industry security standards for ATMs and other financial systems.

Digital Transactions Magazine
The May 2009 issue of Digital Transactions magazine is now available online. The magazine is 6.46 MB and requires Adobe Acrobat to view. Some articles that may be of interest include: (1) a field guide to alternative payments systems, (2) how health care payments could be more like retail payments, (3) how financial institutions are prioritizing payments management more cost-efficiently and (4) an in-depth look at how electronic payments are being integrated in mass transit systems across the United States.

Credit Cards
MasterCard Inc. is getting a big boost from The Travelex Group, a multinational distributor of travel-related prepaid cards. Under a recently announced deal, Travelex will convert its payment card network brand to MasterCard and process card transactions on MC’s year-old debit processing platform called Integrated Processing Solutions, or IPS.

Gaming
Spencer Bachus (R-AL), the ranking Republican member on the House Committee on Financial Services released a statement on May 6, 2009 on illegal Internet gambling legislation currently being considered by the House of Representatives.

The following articles and presentations may also be of interest:
* Here is a video presentation by 60 Minutes on the prevalence of such sites;
* Here are two reports each containing writeups that detail investigation on illegal offshore gaming websites.

Supreme Court Cases
By now you may have heard of the Court’s ruling in Flores-Figueroa v. United States (08-108) wherein the issue being argued before the Court was whether an individual who used a false means of identification without knowing it belonged to another person can be convicted of “aggravated identity theft” under 18 USC 1028A(a)(1). You can read the 8th Circ. opinion here, the petition for certiorari here, the brief for the United States here and the petitioner’s reply here. A New York Times article published on October 21, 2008 on this case can be read here.

On Monday, May 4, 2009, the Court issued its opinion in Flores.
The case called upon the Court to resolve a circuit split over the scope of the mens rea requirement in the federal aggravated identity theft statute, 18 U.S.C. A§ 1028A(a)(1), which imposes a mandatory two-year sentence on anyone who, during and in relation to certain predicate offenses, “knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person.” The Court unanimously agreed with Flores-Figueroa that, to obtain a conviction under A§ 1028A(a)(1), the Government must show that the defendant knew that the “means of identification” he unlawfully transferred, possessed, or used, belonged to a real person.

FDIC Hearing
Here is a formerly live account of the hearing that took place on the morning of May 6, 2009 in front of the Senate Banking Committee.

Witnesses included: FDIC chairperson Sheila Bair, Federal Reserve Bank of Minneapolis President Gary Stern, American Enterprise Institute’s Peter Wallison, University of Chicago Finance Professor Raghuram G. Rajan and The Brookings Institution’s Martin Baily.

You can read Part 1 here and Part 2 here.

Upcoming Legislation

Rep. Barney Frank (D-MA) released a statement on Thursday, May 7, 2009 relating to passage of HR 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill was approved by a vote of 300 to 114. A summary of the bill can be viewed here.

In addition, Rep. Frank issued a press release in relation to consideration of HR 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act and HR 2266, the Reasonable Prudence in Regulation Act.

The first bill regulates Internet gambling while the second bill delays implementation of regulations pursuant to Unlawful Internet Gambling Enforcement Act of 2006 for one year.

Congressional Hearings/Reports

The Congressional Oversight Panel issued a report entitled “Reviving Lending to Small Businesses and Families and the Impact of TALF” on Thursday, May 7, 2009. This report looks at the state of lending for small businesses and then examines the Term Asset-Backed Securities Loan Facility (TALF), which Treasury and the Federal Reserve established to improve access to credit for families and small businesses by supporting the issuance of asset-backed securities collateralized by credit card loans, student loans, auto loans and loans guaranteed by the Small Business Administration.

Compiled by Stan Santos