The news on Friday that the U.S. had indicted 11 individuals associated with the operation of the Internet gambling sites PokerStars, Full Tilt Poker and Absolute Poker for violations of U.S. gambling and anti-money laundering laws and bank fraud, has raised questions about the future of the funds held by those entities on behalf of gamblers, including wins and deposits which likely range in the hundreds of millions of dollars for all three sites.
Prior to the unsealing of the indictment, the U.S. Attorney’s Office obtained anÂ ex parte court order freezing 76 bank accounts in 14 countries because the funds are suspected to be proceeds of crime. The order affects funds held in the names of various corporate entities affiliated with, or controlled by PokerStars, Full Tilt Poker and Absolute Poker in Canada, the U.S., Ireland, Switzerland, Cyprus, Germany, Hong Kong, Malta, Philippines, Luxembourg, Denmark, Panama and England.
The U.S. government is seeking the civil (in rem) forfeiture of US$2 billion from the defendants for the bank and wire fraud charges and an additional US$2.5 billion for the money laundering charges.
The U.S. has bilateral agreements with several countries for civil forfeiture judgments, including the U.K. and Canada. Pursuant to the bilateral agreements, target countries honour U.S. asset seizure requests and as a result freeze funds and transfer assets connected with proceeds of crime.Â Even in the absence of bilateral agreements, there is a high degree of international cooperation among countries to combat money laundering and terrorist financing, and to provide mutual assistance for the seizure of proceeds of crime.
Under U.S. law, in a civil forfeiture action, the action is against the property, not the individual or corporate entity. Once the forfeiting party establishes probable cause to tie the property to the crime, it may obtain a warrant to seize the property in advance of any criminal charge or conviction. The owner of the property is not the defendant in civil forfeiture proceedings – the property is. The owner is relegated to third party claimant. Once probable cause is established that the property is proceeds of crime, the third party must prove by a preponderance of the evidence that it is not. In order to participate in a civil forfeiture action, the defendants would have to be present in the U.S.
For the purposes of a civil forfeiture, if funds are held in a foreign bank that has an interbank account in the U.S., the funds are deemed to have been deposited into the interbank account in the U.S., and any restraining order, seizure or arrest warrant regarding the funds can be served on the respondent bank in the U.S. and the funds restrained or seized locally. Most banks named in the indictment have respondent banking relationships in the U.S.
Although online gambling may be legal, licenced and regulated in a handful of jurisdictions, it Â is not in the U.S. or in Canada unless, in the case of Canada, it is conducted and managed by a provincial government or involves pari-mutuel betting.
Any funds that were paid to PokerStars, Full Tilt Poker and Absolute Poker by gamblers who played online at those sites from countries where online gambling is illegal, is proceeds of crime. The only exception is one or two jurisdictions where gambling is not criminally prohibited or is not a predicate offence to money laundering.