June 8, 2007 Posted By Tom Jones Staff Editor, CasinoGamblingWeb.com The House Committee on Financial Services held a hearing today on Barney Frank's HR-2046 Bill to determine the pluses and minuses of legalized and regulated Internet gambling in the United States. Currently there are 19 co-sponsors of the bill and Barney Frank is looking for more interested congressmen. Few of the Congressmen on the Financial Services Committee attended the hearing, however, all of the invited guests gave testimony and the majority of it was strongly taken as good reasoning for regulated Internet gambling. ----------------------------- Radley Balko, one of the witnesses called to testify at the hearing and senior editor of Reason Magazine, stated the obvious when he said that the Unlawful Internet Gambling Enforcement Act (UIGEA), the current US law that prohibits US online gambling transactions, "was passed under rather dubious circumstances." Furthermore, he said, "what Americans do in their own home, with their own money, on their own time, is none of the federal government's business." Discussing poker as his point of interest, Balko said, "Poker is by far the most popular form of online gambling. Poker has enjoyed a surge in popularity over the past several years. The game of poker is as mainstream and as uniquely America as baseball." Balko's statement saying, "a government based on the principle of liberty doesn't police the personal lives of it's citizens for bad habits, at any level, much less the federal level," was well received by those on the committee. ----------------------------- Jon Prideaux, Independent Payments Consultant, provided testimony at the hearing on Internet gambling in Europe. Mr Prideaux has 17 years service as a senior executive at Visa in Europe and is the immediate past executive vice president of marketing of Visa Europe and a member of the Executive Management Committee. Mr. Prideaux described the methods and processes needed to initiate and complete a transaction using a card as the vehicle of choice greatly detailing the safeguards that are currently used. "Precisely because the Internet gambling environment takes place in the electronic environment, the degree of control that can be applied far exceeds that which can be applied in the face to face environment where cash is the normal currency," Mr. Prideaux said. "Internet gamblers cannot be anonymous and all the activity they undertake can be regulated and controlled through a variety of different processes." When asked about the risk to card issuers and banks, Mr. Prideaux explained that the risk factor is about 0.10% which is much lower than normal Internet sales percentages. Meaning that gambling transactions are less disputed than other forms of Internet commerce. "It should also be recorded that Visa monitoring did not result in any suspicious transaction reports in regard to money laundering from any Internet gambling site," said Prideaux. ----------------------------- Gerald Kitchen, another witness and Chief Executive of Secure Trading Group LTD, operates his Financial Payment business that specializes in the secure processing and settlement of Internet Payments. "There is today the technology and process capability in place to permit those legal transactions to occur," Mr. Kitchen testified, "with protections in place to prohibit underage or compulsive gambling, organized crime, money laundering and fraud. I have spent a career developing such protections, not just for Internet gambling but for all financial transactions," he said. In his prepared statement he indicated that there are areas of higher risks of payment fraud and related abuses which include airline travel bookings, adult entertainment and consumer purchases of digital goods. Mr. Kitchen went on to describe the depth of controls that his company uses as a payment processor to protect all parties to the transaction and the reserves kept in escrow from the merchants accounts for a period of six months to cover any possible charge-backs. "The SGBT system has been extensively reviewed by several United Kingdom based clearing banks, including Barclays, Lloyds and Royal Bank of Scotland, and legal practices including Herbert Smith LLP and Alston & Bird LLP," said Kitchen. ----------------------------- Pastor Gregory Hogan Jr., of First Baptist Church in Barberton, Ohio was invited to the hearings as a witness due to his firsthand experience with problem gambling. The pastor's son, while away at college found that there was easy money to be had in Internet gambling. As is true in most instances such as this, the pastor learned the sad reality of addiction. His son, Gregory, is currently in prison for a bank robbery he committed to feed his gambling addiction. Pastor Hogan admits "I do not consider myself an expert on Internet Gambling," adding that "I am just a dad, and as a dad I realize that the Internet can bring in the worst of what is out there into the laps of our children at the speed of light." He went on to say how proud he is of his son, citing high academics, second cello at Carnegie Hall, and lettering in two sports. He further described his son as a binge drinker, and a binge gambler that fell from the good graces into this netherworld of addiction and crime. ----------------------------- Jeff Schmidt is the CEO of Authis and was another testifier in today's hearings. Authis is a provider of identity and security related products and services to the financial industry. Mr. Schmidt's testimony claimed that "it is critical to understand that age verification and determination of geographical location simply cannot be done reliably over the internet." Mr Schmidt indicated "authentication is the difficult problem of verifying that persons are who they claim to be. Authentication is hard, expensive and requires a delicate balance between cost, security and usability. Today, mass consumer internet authentication is problematic: security is weak and irritated users are forced to maintain long lists of usernames and passwords." "Based on facts and absent supplemental data from location specific technology such as Global Positioning System, reliable determination of the geographic location of individuals/devices on the internet is simply not possible. Additionally, users can very easily use various tactics including anonymizers proxies and zombies to conceal or impersonate their location," said Schmidt. ----------------------------- Michael Colopy is the Senior Vice President Communications, Aristotle Inc. and he perhaps gave the strongest testimony in support of regulation for Internet gambling. Michael Colopy gave intelligent, decisive fact based testimony regarding Aristotle’s role in all security areas that Mr. Schmidt said were fallible. Aristotle provides services to the State of New York to ensure that their off-track betting and interstate lotteries conform to laws and accurately screen for age and location of users. Aristotle also employs verification software for Financial organizations worldwide, which include banks and credit card companies. Major corporations such as American Express utilize Aristotle’s software to prevent age fraud, location determination and fraud associated with miss-use of credit. Mr. Colopy stressed a 99% accuracy rate in all areas of performance, stating "the technology to prevent unauthorized or underage use is available, in use, and effective." ----------------------------- Barney Frank, in conclusion, stated that if we ban Internet gambling for the reasons given then "we should also ban the sale of tobacco and wine over the internet on moral grounds. We don"t check ages for that." Barney Frank stands by his belief that an Internet gambling ban is an infringement on the privacy of the American People and that the UIGEA was enacted wrongly. | 