IP: Internet Casinos

[Dave Farber <farber () cis upenn edu>]

To: Cypherpunks Lite <cp-lite () comsec com>=20
Date: Thu, 13 Nov 1997 17:09:16 -0800=20
From: Steve Schear <schear () lvdi net>=20


Internet Casinos Find a Haven in the Caribbean=20


Los Angeles Times=20


ST. JOHN'S, Antigua and Barbuda-None of the 64,000 residents of this small,
three-island Caribbean nation have complained about the latest
international gambling boom to sweep their secretive little piece of
paradise.=20


In the past few months alone, more than a dozen casinos have opened here.
But most Antiguans don't even know they exist.=20


That's because you can't see them.=20


Packed with games of roulette, blackjack, poker and craps, each gambling
house is small enough to fit into the corner of a tiny room. Yet their
owners say they're taking in millions of dollars a month from thousands of
bettors, from Los Angeles to New York and beyond.=20


It's Internet gambling - a wave of hot new Web sites set up as "virtual
casinos" that enable you to win or lose real money from the comfort of your
own home. And most of these sites originate in small villas or obscure
offices on 108-square-mile Antigua, which is as famous for its secrecy and
scandals as it is for its freewheeling tax laws and banking policies.=20


There are no taxes on capital gains or income in Antigua and Barbuda. The
government shuns outside scrutiny, even from its own citizens. During the
past decade, it has licensed at least 57 offshore banks and at least two
major sports-betting operations, and only it knows the names and assets of
their owners.=20


Under legislation passed earlier this year, Antigua has been charging just
$100,000 a year for an Internet casino license that offers a similar
promise of minimum regulation, maximum anonymity and tax-free profit.=20


But all that soon may change.=20


The Interbet boom comes amid a series of recent corruption and fraud
scandals here, the biggest involving the world's first Internet bank
collapse. From a base in Antigua and with the promise of "utmost privacy,"
two Russians allegedly used the Web to bilk wealthy customers in the United
States and elsewhere out of tens of millions of dollars before closing the
bank and fleeing in August.=20


The virtual casino boom also comes at a time when off-island critics, among
them U.S. law enforcement agencies and the State Department, say Antigua's
loose regulatory track record and its secrecy laws have amounted to a
recipe for disaster. Together, they offer organized crime rings and
international drug cartels a haven to "wash" billions in illicit profits
through Antiguan offshore businesses.=20


"Antigua's offshore banking sector established in the mid1980s with only
limited regulation-expanded rapidly in recent years.... Unfortunately,
inadequate regulation and vetting led to a surge in questionable banking
operations-a number with alleged links to Russian criminal elements,"
declared the State Department's most recent report on the international
narcotics and money-laundering trades, issued in March.=20


"The growing potential for money laundering has been a I increasing concern
of both th l U.S. and Antigua governments," the report added.=20


The U.S. report carefully praised Antiguan Prime Minister Lester Bird for
tough new laws against money laundering passed last December and for his
personal vow to crack down on the island's booming drug transshipment
trade. His government also has promised tougher regulation of all offshore
operations in the months ahead, the State Department noted.=20


To play at an Internet casino, gamblers access a casino site on the World
Wide Web through their personal computers, establish an account with a
credit card or money order and collect their virtual "chips." The computer
program ushers them into a fullcolor, multi-dimensional casino that looks
remarkably similar to those in Las Vegas, and they can gamble at the table
of their choice.=20


Given that it is an industry where only the customers' credit cards and
money orders are real - risked against software and humans they never $see-
Bill Scott, one Web casino entrepreneur acknowledged that Antigua's latest
cybercraze is technology to, as he puts it, "convert real money into
virtual cash" quickly and safely. And all=A0 winners, he said, are paid off
in a=A0 day.=20


Although Scott said he welcomed the "big package of new regulations" that
the Antiguan government recently sent him as I key to protecting the image
of the new industry, he added, "I don't I think anybody has the knowledge
of how to regulate this=A0 technology."=20


U.S. officials say regulating gambling technology is especially tricky in
Antigua, where the cash-strapped government has few resources and little
resolve to become more open.=20


"This island is operated like a lodge.=A0 Its a secret society," said Winsto=
n
Derrick, who publishes Antigua's only independent newspaper. "You have to
fight and fight for information."=20


The government's annual expenditures, for example, are published, but years
after the money is spent-a deliberate effort to minimize public interest
and scrutiny, Derrick said. He added that police officials say even the
most basic crime report is confidential.=20


Although the government permits Derrick to publish his feisty Daily
Observer, he and his brother were arrested when they started the island's
first independent radio station last December. The case is still in court,
and the station hasn't reopened.=20


The prospect of prison also looms for Leonard Tim Hector if the opposition
leader and publisher writes another word about the island's latest
scandal-this one involving the prime minister and his family-in Hector's
biweekly, the Outlet.=20


Bird, whose family has controlled Antigua's power and politics for half a
century, sought and won an injunction against Hector after the opposition
leader published a series of stories viciously attacking the prime minister
for alleged corruption. One quoted a Venezuelan businessman, who was
convicted of cocaine trafficking along with one of Bird's brothers two
years ago, as saying that the prime minister took a $1 million bribe from
Colombia's Cali cartel to permit drug transshipments through Antigua -a
charge Bird flatly denies.=20


The injunction hasn't stopped Hector from sharply criticizing Bird's
government for its policies toward offshore business and its lax
regulation. He blamed those factors for the recent Internet bank debacle
and said they invite similar abuse in the virtual casino industry.=20


"They simply do not intend to regulate these new Internet casinos," Hector
said in a recent interview. "The prime minister doesn't see that in his
best interest."=20


None of the few government officials who oversee the new cyber-casino trade
along with all other offshore businesses on the island could be reached for
comment.=20


In the aftermath of the Internet bank collapse, though, the official
Antigua & Barbuda Government Internet Web page-an elaborate electronic
magnet designed to attract all kinds of international businesses -has
posted the new offshore rules and regulations for closer inspection.=20


But a look at the rise and fall of the European Union Bank, which billed
itself as the world's first, full-service Internet bank helps explain why
U.S. officials are viewing Antigua's latest cyberboom with concern.=20


Privately, many of those officials said the Antiguan government should have
been suspicious of the bank's operations long before it closed its only
door. shut down its Web site and laid off its half a dozen employees ih
early August, leaving tens of millions of dollars in deposits missing in
cyberspace.=20


The Bank of England grew suspicious of the bank last October, It publicly
warned investors that the bank, which the two Russians had opened in a
small office above a St. John's bar two years before, was offering
unrealistically high interest rates in an unsecured environment that is not
policed.=20


After a similar alert from U.S. banking officials in April, the state of
Idaho issued a cease. and-desist order against the bank, barring it from
offering its wide array of banking and credit card services to Internet
customers in the state.=20


But it wasn't until the day the bank shut down and its directors
disappeared this summer that Antigua's new Office of National Drugs and
Money Laundering Policy issued an official "fraud alert," which opposition
publisher Hector called "closing the stable door after both thieves and
horses have bolted."=20
--end=20


Antigua bookies not worried=20


Los Angeles Times=20


ST. JOHN'S, Antigua and Barbuda-The few owners of virtual casinos in
Antigua who agreed tO be interviewed by the Los Angeles Times asserted that
they would welcome the new Internet betting laws, insisting that their
operations are not only legal and honest but also state of the art.=20


American Bill Scott, who moved his offshore sports betting operation to
Antigua from the nearby island of St. Martin two years ago, said his
Intercasino Web site was a natural next step for his parent company, World
Wide Tele Sports.=20


Located in the heart of St. John's, the nation's capital-atop a modern
five-story, glass-and-marble building that most Antiguans think houses a
computer school-Scott's operation handles millions of dollars in U.S.
sports bets via toll-free telephone numbers under a separate Antiguan
gaming license, he says.=20


Scott says he was drawn to Antigua by the efficient phone system and, of
course, the fact that gambling is legal here in a tax haven where
confidentiality reigns and where even the Internet casinos are not viewed
askance.=20


Surrounded by dozens of computer stations where young Antiguans in headsets
were taking sports bets on every conceivable contest one recent Sunday
afternoon, Scott said business in his new Internet casino-located in a tiny
box in an adjacent office-is so good he plans to open two more this week.=20


"It's like Vegas. If you lose in one casino, you can go down the street to
another," he said.=20
--end=20








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Las Vegas, NV 89129=A0=A0=A0=A0=A0 | economic and crypto dissident=20
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=A0=A0=A0=A0The push by western governments for financial transparency and=
=20
=A0=A0=A0=A0banning unrestricted use of cryptography is blatent politicial=
=20
=A0=A0=A0=A0tyranny.=20


=A0=A0=A0=A0Free Cypherpunk Political Prisoner Jim Bell=20














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