The following definitions apply
solely for purposes of this part:
(a) Actual
knowledge with respect to a transaction or commercial customer
means when a particular fact with respect to that transaction or commercial
customer is known by or brought to the attention of
(1) An individual in the organization responsible
for the organization’s compliance function with respect to that transaction
or commercial customer; or
(2) An officer of the organization.
(b) Automated clearing house system or ACH system means a
funds transfer system, primarily governed by the ACH Rules, which
provides for the clearing and settlement of batched electronic entries
for participating financial institutions. When referring to ACH systems,
the terms in this regulation (such as “originating depository financial
institution,” “operator,” “originating gateway operator,” “receiving
depository financial institution,” “receiving gateway operator,” and
“third-party sender”) are defined as those terms are defined in the
ACH Rules.
(c) Bet or wager
(1) Means the staking or risking by any
person of something of value upon the outcome of a contest of others,
a sporting event, or a game subject to chance, upon an agreement or
understanding that the person or another person will receive something
of value in the event of a certain outcome;
(2) Includes the purchase of a chance or
opportunity to win a lottery or other prize (which opportunity to
win is predominantly subject to chance);
(3) Includes any scheme of a type described
in 28 U.S.C. 3702;
(4) Includes any instructions or information pertaining to the establishment
or movement of funds by the bettor or customer in, to, or from an
account with the business of betting or wagering (which does not include
the activities of a financial transaction provider, or any interactive
computer service or telecommunications service); and
(5) Does not include—
(i) Any
activity governed by the securities laws (as that term is defined
in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(47)) for the purchase or sale of securities (as that term is
defined in section 3(a)(10) of that act (15 U.S.C. 78c(a)(10));
(ii) Any transaction
conducted on or subject to the rules of a registered entity or exempt
board of trade under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
(iii) Any over-the-counter
derivative instrument;
(iv) Any other transaction that—
(A) Is excluded or exempt from
regulation under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
or
(B) Is exempt from
state gaming or bucket shop laws under section 12(e) of the Commodity
Exchange Act (7 U.S.C. 16(e)) or section 28(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78bb(a));
(v) Any contract of indemnity or guarantee;
(vi) Any contract for
insurance;
(vii)
Any deposit or other transaction with an insured depository institution;
(viii) Participation
in any game or contest in which participants do not stake or risk
anything of value other than—
(A) Personal efforts of the participants
in playing the game or contest or obtaining access to the Internet;
or
(B) Points or credits
that the sponsor of the game or contest provides to participants free
of charge and that can be used or redeemed only for participation
in games or contests offered by the sponsor; or
(ix) Participation
in any fantasy or simulation sports game or educational game or contest
in which (if the game or contest involves a team or teams) no fantasy
or simulation sports team is based on the current membership of an
actual team that is a member of an amateur or professional sports
organization (as those terms are defined in 28 U.S.C. 3701) and that
meets the following conditions:
(A) All prizes and awards offered
to winning participants are established and made known to the participants
in advance of the game or contest and their value is not determined
by the number of participants or the amount of any fees paid by those
participants.
(B) All
winning outcomes reflect the relative knowledge and skill of the participants
and are determined predominantly by accumulated statistical results
of the performance of individuals (athletes in the case of sports
events) in multiple real-world sporting or other events.
(C) No winning outcome is based—
(1) On the score, point-spread, or any performance
or performances of any single real-world team or any combination of
such teams, or
(2) Solely
on any single performance of an individual athlete in any single real-world
sporting or other event.
(d) Block means to reject a particular
transaction before or during processing, but it does not require freezing
or otherwise prohibiting subsequent transfers or transactions regarding
the proceeds or account.
(e) Card issuer means any person who issues a credit card, debit card, pre-paid
card, or stored value card, or the agent of such person with respect
to such card.
(f) Card system means a system
for authorizing, clearing and settling transactions in which credit
cards, debit cards, pre-paid cards, or stored value cards (such cards
being issued or authorized by the operator of the system), are used
to purchase goods or services or to obtain a cash advance. The term
includes systems both in which the merchant acquirer, card issuer,
and system operator are separate entities and in which more than one
of these roles are performed by the same entity.
(g) Check clearing house means an association of banks or
other payors that regularly exchange checks for collection or return.
(h) Check collection system means an interbank
system for collecting, presenting, returning, and settling for checks
or intrabank system for settling for checks deposited in and drawn
on the same bank. When referring to check collection systems, the
terms in this regulation (such as “paying bank,” “collecting bank,”
“depositary bank,” “returning bank,” and “check”) are defined as those
terms are defined in 12 CFR 229.2. For purposes of this part, “check”
also includes an electronic representation of a check that a bank
agrees to handle as a check.
(i) Commercial
customer means a person that is not a consumer and that contracts
with a non-exempt participant in a designated payment system to receive,
or otherwise accesses, payment transaction services through that non-exempt
participant.
(j) Consumer means a natural
person.
(k) Designated payment system means a
system listed in section 233.3.
(l) Electronic
fund transfer has the same meaning given the term in section 903
of the Electronic Fund Transfer Act (15 U.S.C. 1693a), except that
such term includes transfers that would otherwise be excluded under
section 903(6)(E) of that act (15 U.S.C. 1693a(6)(E)), and includes
any funds transfer covered by Article 4A of the Uniform Commercial
Code, as in effect in any state.
(m) Financial
institution means a state or national bank, a state or federal
savings and loan association, a mutual savings bank, a state or federal
credit union, or any other person that, directly or indirectly, holds
an account belonging to a consumer. The term does not include a casino,
sports book, or other business at or through which bets or wagers
may be placed or received.
(n) Financial transaction
provider means a creditor, credit card issuer, financial institution,
operator of a terminal at which an electronic fund transfer may be
initiated, money transmitting business, or international, national,
regional, or local payment network utilized to effect a credit transaction,
electronic fund transfer, stored value product transaction, or money
transmitting service, or a participant in such network, or other participant
in a designated payment system.
(o) Foreign
banking office means
(1) any non-U.S. office of a financial
institution; and
(2)
any non-U.S. office of a foreign bank as described in 12 U.S.C. 3101(7).
(p) Interactive computer service means any information service, system, or access software provider
that provides or enables computer access by multiple users to a computer
server, including specifically a service or system that provides access
to the Internet and such systems operated or services offered by libraries
or educational institutions.
(q) Internet means the international computer network of interoperable packet
switched data networks.
(r) Internet gambling
business means the business of placing, receiving or otherwise
knowingly transmitting a bet or wager by any means which involves
the use, at least in part, of the Internet, but does not include the
performance of the customary activities of a financial transaction
provider, or any interactive computer service or telecommunications
service.
(s) Intrastate transaction means
placing, receiving, or otherwise transmitting a bet or wager where—
(1) The bet or wager is initiated
and received or otherwise made exclusively within a single state;
(2) The bet or wager and
the method by which the bet or wager is initiated and received or
otherwise made is expressly authorized by and placed in accordance
with the laws of such state, and the state law or regulations include—
(i) Age and location verification requirements reasonably designed
to block access to minors and persons located out of such state; and
(ii) Appropriate data
security standards to prevent unauthorized access by any person whose
age and current location has not been verified in accordance with
such state’s law or regulations; and
(3) The bet or wager does not violate any
provision of—
(i) The Interstate Horseracing Act of
1978 (15 U.S.C. 3001 et seq.);
(ii) 28 U.S.C. chapter 178 (professional
and amateur sports protection);
(iii) The Gambling Devices Transportation
Act (15 U.S.C. 1171 et seq.); or
(iv) The Indian Gaming Regulatory Act
(25 U.S.C. 2701 et seq.).
(t) Intratribal transaction means placing, receiving or otherwise
transmitting a bet or wager where—
(1) The bet or wager is initiated and received
or otherwise made exclusively—
(i) Within the Indian lands
of a single Indian tribe (as such terms are defined under the Indian
Gaming Regulatory Act (25 U.S.C. 2703)); or
(ii) Between the Indian lands of two
or more
Indian tribes to the extent that intertribal gaming is authorized
by the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.);
(2) The bet or wager and
the method by which the bet or wager is initiated and received or
otherwise made is expressly authorized by and complies with the requirements
of—
(i) The applicable tribal ordinance
or resolution approved by the Chairman of the National Indian Gaming
Commission; and
(ii) With respect to class III gaming, the applicable tribal-state
compact;
(3) The applicable tribal ordinance or resolution or tribal-state
compact includes—
(i) Age and location verification requirements
reasonably designed to block access to minors and persons located
out of the applicable tribal lands; and
(ii) Appropriate data security standards
to prevent unauthorized access by any person whose age and current
location has not been verified in accordance with the applicable tribal
ordinance or resolution or tribal-state Compact; and
(4) The bet or wager does
not violate any provision of—
(i) The Interstate Horseracing
Act of 1978 (15 U.S.C. 3001 et seq.);
(ii) 28 U.S.C. chapter 178 (professional
and amateur sports protection);
(iii) The Gambling Devices Transportation
Act (15 U.S.C. 1171 et seq.); or
(iv) The Indian Gaming Regulatory Act
(25 U.S.C. 2701 et seq.).
(u) Money transmitting business has the meaning given the
term in 31 U.S.C. 5330(d)(1) (determined without regard to any regulations
prescribed by the Secretary of the Treasury thereunder).
(v) Operator of a designated payment system means
an entity that provides centralized clearing and delivery services
between participants in the designated payment system and maintains
the operational framework for the system. In the case of an automated
clearinghouse system, the term “operator” has the same meaning as
provided in the ACH Rules.
(w) Participant in
a designated payment system means an operator of a designated
payment system, a financial transaction provider that is a member
of or, has contracted for financial transaction services with, or
is otherwise participating in, a designated payment system, or a third-party
processor. This term does not include a customer of the financial
transaction provider, unless the customer is also a financial transaction
provider otherwise participating in the designated payment system
on its own behalf.
(x) Reasoned legal opinion means a written expression of professional judgment by a state-licensed
attorney that addresses the facts of a particular client’s business
and the legality of the client’s provision of its services to relevant
customers in the relevant jurisdictions under applicable federal and
state law, and, in the case of intratribal transactions, applicable
tribal ordinances, tribal resolutions, and tribal-state compacts.
A written legal opinion will not be considered “reasoned” if it does
nothing more than recite the facts and express a conclusion.
(y) Restricted transaction means any of the following
transactions or transmittals involving any credit, funds, instrument,
or proceeds that the act prohibits any person engaged in the business
of betting or wagering (which does not include the activities of a
financial transaction provider, or any interactive computer service
or telecommunications service) from knowingly accepting, in connection
with the participation of another person in unlawful Internet gambling—
(1) Credit, or the proceeds
of credit, extended to or on behalf of such other person (including
credit extended through the use of a credit card);
(2) An electronic fund transfer, or funds
transmitted by or through a money transmitting business, or the proceeds
of an electronic fund transfer or money transmitting service, from
or on behalf of such other person; or
(3) Any check, draft, or similar instrument
that is drawn by or on behalf of such other person and is drawn on or payable
at or through any financial institution.
(z) State means any state of the United States, the District
of Columbia, or any commonwealth, territory, or other possession of
the United States, including the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, American Samoa, Guam,
and the Virgin Islands.
(aa) Third-party processor means a service provider that—
(1) In the case of a debit transaction
payment, such as an ACH debit entry or card system transaction, has
a direct relationship with the commercial customer that is initiating
the debit transfer transaction and acts as an intermediary between
the commercial customer and the first depository institution to handle
the transaction;
(2)
In the case of a credit transaction payment, such as an ACH credit
entry, has a direct relationship with the commercial customer that
is to receive the proceeds of the credit transfer and acts as an intermediary
between the commercial customer and the last depository institution
to handle the transaction; and
(3) In the case of a cross-border ACH debit
or check collection transaction, is the first service provider located
within the United States to receive the ACH debit instructions or
check for collection.
(bb) Unlawful
Internet gambling means to place, receive, or otherwise knowingly
transmit a bet or wager by any means which involves the use, at least
in part, of the Internet where such bet or wager is unlawful under
any applicable federal or state law in the state or tribal lands in
which the bet or wager is initiated, received, or otherwise made.
The term does not include placing, receiving, or otherwise transmitting
a bet or wager that is excluded from the definition of this term by
the act as an intrastate transaction or an intra-tribal transaction,
and does not include any activity that is allowed under the Interstate
Horseracing Act of 1978 (15 U.S.C. 3001 et seq.; see section 233.1(a)).
The intermediate routing of electronic data shall not determine the
location or locations in which a bet or wager is initiated, received,
or otherwise made.
(cc) Wire transfer system means a system through which an unconditional order to a bank to
pay a fixed or determinable amount of money to a beneficiary upon
receipt, or on a day stated in the order, is transmitted by electronic
or other means through the network, between banks, or on the books
of a bank. When referring to wire transfer systems, the terms in this
regulation (such as “bank,” “originator’s bank,” “beneficiary’s bank,”
and “intermediary bank”) are defined as those terms are defined in
12 CFR part 210, appendix B.
