Policies and Procedures for Non-exempt Participants

Non-exempt participants must “establish and implement” the necessary policies and procedures. [12 CFR 233.5(a)] The policies and procedures must be written and they must be reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions. [12 CFR 233.5(a)]

“Restricted transaction” has a long and complicated definition in Regulation GG. [12 CFR 233.2(y)] In essence it means a transaction in almost any form (check, draft, electronic funds transfer, credit transaction) executed in connection with illegal Internet gambling.

We will look at examples of specific policies and procedures in the next section. Before we do that, however, we should point out that a non-exempt participant can, if certain conditions are met, comply with this requirement by relying on the policies and procedures of the system in which the participant is participating. [12 CFR 233.5(b)]

Here are the conditions:

  • The policies and procedures of the system must also be reasonably designed to identify and block or otherwise prevent or prohibit acceptance of the products or services of the payment system with respect to restricted transactions. [12 CFR 233.5(b)]
  • The policies and procedures of the system must comply with Regulation GG. A participant can determine this is so by obtaining from the operator of the system a written statement or notice to the effect that the operator has designed or structured the system’s policies and procedures for identifying and blocking or otherwise preventing or prohibiting restricted transactions to comply with the requirements of Regulation GG. The participant is allowed to rely on the operator’s statement until notified to the contrary by the participant’s regulator. [12 CFR 233.5(c)]