- Requests from the Rational Group to permit P2P transfers have been rejected by the New Jersey DGE.
- Money laundering, fraud prevention and collusion were given as the reasons.
- Recent research suggests that such objections may be less valid that regulators believe.
- An Austrian report authored by top German economists found that the risks of money laundering in online poker were extremely small and exaggerated by policy makers.
In response to feedback and suggestions received during the public comment period of its online regulation development process, the New Jersey Division of Gaming Enforcement (DGE) has rejected a call by Rational Group to permit player to player (P2P) money transfers.
The Rational Group’s consultation submission proposed an amendment to the rules to permit P2P transfers: “…provided that the Division is assured that the operator implements limits and carries out checks to ensure those limits are followed.”
P2P transfers are useful for staking arrangements, as well as simply sending money to friends and settling prop bets. They are a common feature in major dot-com poker rooms.
The DGE rejected the proposal giving fraud prevention, collusion and money laundering as its reasons (see page 42 of the draft.)
The grounds for the rejection sound plausible, but the facts may not be quite as clear as regulators suggest. A recent, and unique study by Austrian company TÜV Trust IT GmbH into money laundering risks in online poker suggests that policymakers have exaggerated the risks of money laundering.
Online poker is an expensive and unattractive media for money laundering, the report concludes, quoting British Member of the European Parliament and online gambling rapporteur Ashley Fox’s explanation: “online games of chance are a cashless service and that the 'electronic fingerprint’ makes it easy to track the activities of players and providers.”
The report’s ten point plan to combat what little risk of money laundering exists in online poker could easily be adopted by licensed operators in New Jersey. Recommended actions include: the identification of players; maximum betting limits; IT-based analysis processes; monitoring “anomalies”; cooperation with financial institutions; transparency of payment and following know your customer (KYC) procedures in processing withdrawals.
Despite this, barring player-to-player transfer functionality is common under state regulation. It is not permitted in Spain, Italy or France, nor is it allowed in Nevada.
State regulated online poker in New Jersey is planned to start at 9am on November 26, 2013.
