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Banks Surrenders Alleged Internet Gambling-Related Funds to FBI

Posted on September 21st, 2010

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The FBI issued a statement before the end of last week saying that Scottdale Arizona’s Goldwater Bank has cooperated with them in agreeing to have $734,000 in assets that is allegedly money from illegal online gambling and money laundering frozen. The bank has been accused of cooperating with online gambling operations by transfering funds for a number of online gambling sites, which includes what is considered to be the largest online poker game room in the world. According to the FBI reports, the lowest estimated amount the bank transferred in the first six months of 2009 is $13 million. two firms owned by Ahmad Khawaja, namely Allied Wallet and allied Systems have been reportedly involved actively in fund transfers between the players of online gambling sites, where the players are supposed to deposit funds into one of its accounts. Kahawaja’s companies had money from outside the United States transferred from people who had the understanding that money is being exchanged to fund a gambling site.

The government of the US filed a civil forfeiture complain, with which Goldwater Bank agreed to surrender the funds to the FBI. In turn, the bank cleared claims that the money was traceable to money landing and online gambling businesses. The Unlawful Internet Gambling Enforcement Act or the UIGEA had explicitly disallowed financial institutions like banks in the US to process transactions that could be connected to online gambling, which is not allowed in the countryl. For its part, Goldwater Bank has expressed that it did not have any idea that the transactions done in the bank has links to sites that offer offshore gambling. In a statement by Assistant Director in charge of the FBI, Janice Fedarcyk, she claims, “Although Goldwater Bank denies guilty knowledge of its role in facilitating an illegal online gambling business, it was paid to execute transactions that were essential to the operation of this criminal enterprise. The forfeiture settlement means the bank won’t profit by providing this service.” Goldwater figured in another national issue before, this time with it receiving Troubled Asset Relief Program or TARP funding years ago. This program was put into law in 2008 by then-president George W. Bush to strengthen the banking sector. Federal money was invested into banks, and Goldwater was among a few banks in Arizona that received this funding. This funding would ultimately be stopped once an investigation will reveal that the bank indeed had knowledge that transactions in the bank are related to gambling.

Special Inspector General Neil Barofsky of TARP said, “Today’s charges and settlement should send a powerful message to TARP recipients that they will be held strictly accountable for any misdeeds while they stand as custodians of taxpayer dollars. SIGTARP commends the leadership of the U.S. Attorney for the Southern District of New York for his continued use of both civil and criminal remedies to protect taxpayer interests.” A civil settlement was reached by Khawaja, in behalf of his two companies and the US government just last month. In the agreement, Khawaja agreed to have the $13.3 million that was deposited at Goldwater Bank between the dates January to May of 2009 forfeited. In June of the same year, the FBI already confiscated that amount while Khawaja agreed that he and his company should already not be involved in any other questionable transactions anymore.

UIGEA regulations, since they were approved and implemented in June, have already closely monitored transactions done in payment processors like the companies of Khawaja. The 2006 law has been aiming to curb online gambling the US. Among its measures are disallowing online gambling providers to operate from the United States and thus disallow US residents to set up accounts in these websites, as well as preventing credit card companies and other financial institutions to process fund transfers that are for internet gambling purposes. As of the moment, pro-internet gambling sectors have scored minor victories since then. Barney Frank’s HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act has so far passed the house of representatives. The bill will still have to go through the senate before finally reaching President Obama’s desk, causing internet gambling sites to be still considered illegal in the US.