Regulation GG: Overview, definition, and example
What is Regulation GG?
Regulation GG is a regulation established by the U.S. Department of the Treasury that addresses restrictions on transactions involving online gambling. Specifically, it prohibits financial institutions from processing payments related to unlawful Internet gambling. The regulation applies to banks, credit card companies, and other payment processors, requiring them to implement measures to block such transactions. The goal of Regulation GG is to prevent the facilitation of illegal online gambling activities and to comply with the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.
For example, financial institutions must ensure that they do not process payments for online gambling sites that operate in states where gambling is illegal.
Why is Regulation GG important?
Regulation GG is important because it helps enforce the UIGEA, which aims to curb the growth of illegal online gambling in the U.S. By ensuring that financial institutions do not unknowingly facilitate illegal gambling transactions, Regulation GG protects consumers, reduces the potential for money laundering, and ensures that U.S. financial systems comply with federal laws.
For businesses, particularly financial institutions, understanding and complying with Regulation GG is crucial to avoid legal penalties and maintain a lawful operation. Additionally, the regulation helps to ensure that gambling activities are carried out within the scope of state and federal laws.
Understanding Regulation GG through an example
Imagine an online gambling company based in a country where online betting is legal, but it operates in a U.S. state where gambling is prohibited. Under Regulation GG, a U.S. bank that processes payments for this gambling website would be required to block any transactions related to the site to comply with the law. If the bank failed to do so, it could face penalties for facilitating unlawful transactions.
In another example, a credit card company is required to block payments made to a website that offers online poker games in a state where gambling is illegal. If the card company processes payments to this site, it would be violating Regulation GG.
Example of Regulation GG compliance clause
Here’s how a Regulation GG compliance clause might look in a financial institution's policy:
“The institution will take necessary measures to ensure that no payments related to unlawful Internet gambling are processed. In compliance with Regulation GG, transactions for online gambling activities prohibited under the UIGEA will be blocked.”
Conclusion
Regulation GG is a vital regulation designed to prevent financial institutions from processing transactions related to illegal online gambling in the U.S. It helps ensure compliance with the Unlawful Internet Gambling Enforcement Act and protects both consumers and financial institutions from legal and financial risks. Understanding and complying with Regulation GG is essential for businesses involved in processing payments to ensure they are not facilitating unlawful transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.