[89970] in Cypherpunks
Internet Casinos
daemon@ATHENA.MIT.EDU (Steve Schear)
Thu Nov 13 20:51:00 1997
Date: Thu, 13 Nov 1997 17:09:16 -0800
To: cypherpunks@cyberpass.net
From: Steve Schear <schear@lvdi.net>
Reply-To: Steve Schear <schear@lvdi.net>
<bold>Internet Casinos Find a Haven in the Caribbean
</bold>Los Angeles Times
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.
In the past few months alone, more than a dozen casinos have opened
here. But most Antiguans don't even know they exist.
That's because you can't see them.
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.
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.
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.
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.
But all that soon may change.
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.
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.
"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.
"The growing potential for money laundering has been a I increasing
concern of both th l U.S. and Antigua governments," the report added.
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.
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.
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 winners, he
said, are paid off in a day.
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 technology."
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.
"This island is operated like a lodge. Its a secret society," said
Winston Derrick, who publishes Antigua's only independent newspaper.
"You have to fight and fight for information."
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.
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.
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.
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.
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.
"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."
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.
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.
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.
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.
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.
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.
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."
--end
<bold>Antigua bookies not worried
</bold>Los Angeles Times
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.
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.
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.
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.
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.
"It's like Vegas. If you lose in one casino, you can go down the street
to another," he said.
--end
PGP mail preferred, see http://www.pgp.com and
http://web.mit.edu/network/pgp.html
RSA fingerprint: FE90 1A95 9DEA 8D61 812E CCA9 A44A FBA9
RSA key:
http://keys.pgp.com:11371/pks/lookup?op=index&search=0x55C78B0D
---------------------------------------------------------------------
Steve Schear (N7ZEZ) | Internet: schear@lvdi.net
7075 West Gowan Road | Voice: 1-702-658-2654
Suite 2148 | Fax: 1-702-658-2673
Las Vegas, NV 89129 | economic and crypto dissident
---------------------------------------------------------------------
The push by western governments for financial transparency and
banning unrestricted use of cryptography is blatent politicial
tyranny.
Free Cypherpunk Political Prisoner Jim Bell
