Neteller to Pullout of U.S.

A source close to Poker Source has said that embattled online payment processor, Neteller, will officially shutout United States customers as early as Thursday. Details will follow as soon as they are disclosed, but suffice it to say that this is a knee-jerk reaction by the most popular online gambling funding option in the industry.

Less than a week after President Bush signed the Unlawful Internet Gambling Enforcement Act in October 2006, Neteller did say that, although it is headquartered in the Isle of Man and has no operations in the United States, that it "…will comply with the Act and its related regulations as if it were subject to the Act’s jurisdiction." So, it did imply that it may close to U.S. customers eventually, but nothing necessarily needed to happen for several more months, as the Secretary of the Treasury and the Board of Governors of the Federal Reserve System have yet to put regulations in place for financial institutions.

The sudden and quite possibly disastrous business decision is a direct result of the Monday arrests of Neteller’s founders, Stephen Lawrence and John Lefebvre. They have been charged by the U.S. government with "…conspiring to transfer funds with the intent to promote illegal gambling."

While neither man has worked for Neteller for some time, the U.S. feels that they knowingly and willfully facilitated money transfers from U.S. citizens (and their U.S. banks) to “illegal” foreign internet gambling companies. While one can argue all day as to whether or not the U.S. anti-gambling laws are just, it has become quite apparent that, like it or not, Neteller was walking a thin line. The U.S. government’s evidence against the founders includes the fact that all but 5 percent of the company’s revenue in 2005 was from internet gambling companies, 64 percent of its revenue was derived from American customers’ funds transfers in the first of half of 2006, and Neteller even came right out and said in IPO documents that these transactions were illegal according to U.S. law.

The day before President Bush signed the UIGEA into law, Bruce Elliott, the company’s executive vice president said, “I don’t think we have a very big problem.”

Earlier today, it was reported that Neteller had eliminated the instaCASH deposit method for U.S. customers, although the company alleged that it was unrelated to the arrests or U.S. legislation. It appears, especially now, that it was very much related to recent events.

There is no information yet as to what will happen to funds in U.S. customers’ accounts, but they are almost certainly safe. Neteller is regulated by the Financial Services Authority in the UK and maintains 110% of its customers’ funds (deposited, in-transit, and uncleared) in “segregated trust accounts,” separate from its own operational funds. Most likely, Neteller will keep U.S. accounts open for a specified period of time and allow its customers to withdraw their funds as usual.

Again, as more details become available, Poker Source will report them.

Originally published 1:20 PM Wednesday, January 17, 2007