By Christine Duhaime, B.A., J.D., Gaming Attorney & Certified Anti-Money Laundering SpecialistFollow @cduhaime
Ruth Parasol, the founder of PartyGaming Plc (Party Poker), now Bwin, is selling her 7% interest in Bwin to avoid the gaming regualtory vetting process in New Jersy according to the Financial Times.
Bwin hopes to be registered to provide services to Borgata, an Atlantic City casino. In order to be registered, service providers must undergo a suitability review process by New Jersey's gambling regulator to ensure that they, and the persons and entities with whom they are associated do not negatively affect the integrity of gaming. Ms. Parsol is a former lawyer. She is alleged to have operated an online porn site before entering the online gambling field.
In 2010, PartyGaming Plc acquired all of the issued and outstanding shares in Bwin Interactive Entertainment AG pursuant to a reverse take-over. At the time, the merger was touted as a desirable one to position the merged entity to re-enter the U.S. market when and if online gambling was legalized.
However, now that several states are permitting online gambling, there are legacy issues that may be difficult for PartyGaming to overcome because the FBI Financial Crimes Report for Fiscal Year 2008 reported that Party Gaming Inc. "provided money laundering services to members of Italian organized crime."
From a regulatory perspective during the investigation for licensing, numerous issues may arise in connection with the FBI report such as: historically, determining who the Italian organized crime members were; and whether any of them were Specially Designated Nationals on OFAC's sanctions list, and currently, whether Bwin's financial crime compliance regime is adequate; whether funds are received from or sent to OFAC sanctioned listed entities and persons; whether funds are received from or sent to persons and entities listed on terrorists lists; and whether it operates in compliance with the laws of each country in which it accepts bets. Some of these queries are not unique to Bwin's application.
PartyGaming was indirectly mentioned in the suitability review of Caesars Entertainment Corporation by the Massachusetts Gaming Commission. In its investigative report, the MGC noted that, pursuant to PartyGaming's 2009 Non-Prosecution Agreement with the U.S. government, it offered online gambling to players in the U.S and undertook U.S. payment processing arrangements that seem to have been designed to hide the nature of the transactions as gambling transactions at a time when its disclosure documents commented on the fact that U.S. regulatory authorities viewed its provision of gambling services to U.S. persons as illegal.
Insiders say that if Bwin is found suitable and licenced, it will have to immediately cease operations in Canada. No doubt the registration application of Bwin will be closely watched.