NETELLER Announces Service Changes to Canadian and Turkish Market

A press release on the NETELLER Plc Group website on 26th March announced several significant changes to its services in a number of markets. Press release as follows: –

The Group continually assesses the risk profile and status of the markets its serves. Recent actions by regulators, payment processors, and online gaming operators have increased the uncertainty around certain activities related to online gambling in some jurisdictions. The Board of Directors of the Company reached a decision, on 25 March 2007, that the risk to the Group’s ongoing business in Canada and Turkey has increased in the light of such developments. The Board has therefore concluded that the Group will no longer process transfers related to online gambling sites on behalf of Canada or Turkey resident customers.

Reduced Service to Canada
Cessation of Canadian transfers to gambling merchants: the Group will cease processing online gambling related transactions for Canada-resident customers with effect from 12.01 AM MST Monday 9 April 2007.

Suspension of InstaCASH transactions: As of today Monday 26 March 2007, at 12:01 AM MST, Canada-resident customers were no longer able to deposit funds using NETELLER’s instaCASH service either directly or from any online gambling site. Non-gambling services continue: Canada-resident customers will continue to be able to use their e-wallet accounts for non-gambling transactions, including peer-to-peer and pre-paid debit transactions.

Available customer funds: Customer funds, including those of Canadian residents, are held in a pooled, segregated trust account and will be available for withdrawal by customers, on demand. Canadian customers continue to be able to use their e-wallet accounts for non-gambling transactions.

Reduced Service to Turkey
In light of recent legislation passed in Turkey on 28 February 2007, which prohibits certain forms of online gambling to be offered by any “unauthorised” domestic or foreign company to citizens in Turkey, NETELLER has decided to implement a voluntary phased withdrawal of the payment services related to online gambling that it offers customers to the Turkish market.

Withdrawal of local bank funding options: Local bank deposit options for Turkey-resident customers were withdrawn on Friday 9 March 2007.
Cessation of Turkish transfers to and from online gambling merchants: The Group has ceased processing online gambling related transactions for Turkey-resident customers with effect from 6.01 AM GMT Monday 26 March 2007.

Non-gambling related services continue: Turkey-resident customers will be able to continue to use their NETELLER e-wallet account for any non-gambling related money transfers and withdrawals. Customers located in other parts of the world are not affected by this change, and NETELLER continues to service these customers in the normal manner.

Group Business Impact
The Canadian business of the NETELLER Group would likely have contributed significantly to the Group’s revenue and profitability during 2007 and the loss of this business is now likely to have a material negative impact on the Group’s results for the full year ending 31 December 2007. The Turkish business of the Group does not represent a material proportion of the Group’s overall customer base, revenue or profitability.

The Group does not anticipate making further significant reductions in staff as a result of these service changes as the Board believes that its Calgary-based operations are appropriately sized to handle the remaining non-North American business of the Group. The Group will continue to focus on the growth markets of Europe and Asia.

Other Updates
The Group’s shares will continue to be suspended from trading on AIM in view of the continuing uncertainties the Group faces. Further announcements will be made as appropriate.

The Company is working towards the finalisation of its audited annual results for the year ended 31 December 2006 and will announce the date on which these will be published to the market in due course.

The Company would, in light of recent press comment concerning its announcement of 21 March 2007, like to make clear that the 75 day period referred to in that announcement was for agreement of a plan of distribution with the United States Attorney’s Office. It would remain to be determined, as part of that plan, the precise timing of the distribution of funds to US customers.

Further information is available on the Group’s website in the form of updated FAQs.

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New EC Ruling Could Have Effect on US Internet Gambling Laws

On 21st March, The European Commission (EC) took the next step towards removing gambling restrictions in a number of EU states.

In the spring of 2006, the European Commission initiated infringement proceedings under Article 226 of the Treaty on European Union against seven EU member states following complaints lodged by private gambling companies. Late in 2006, the EC then also sent letters of formal notice to France, Germany, and Austria following concern that these countries were also implementing protectionist policies.

After receiving replies to its written request for information from Finland, Hungary, and Denmark, the EC deemed the replies unsatisfactory, and took the next step by issuing reasoned options to these states. Under Article 226 of the Treaty on European Union, infringement proceedings are divided into three stages: A letter of formal notice, a reasoned option, and referral to the European Court of Justice (ECJ).

The Commission stated that countries who do not allow out of country sports betting, or Internet gambling activities, yet promote in-country gambling such as government run lotteries and casinos must open up their borders to gambling or the EU can take them to court. It explained that these countries, specifically Denmark, Finland, and Hungary, cannot claim that they are protecting their consumers from gambling since they promote certain kinds of gambling within their country.

But the real significance of this ruling is how it will affect the future of Internet gambling in the United States.

No other country in the world has a stronger rate of gambling growth than the United States, nor is there another country that more forcefully pushes out other countries from entering their market, which clearly goes against WTO and EU rules.

Every day the State House and Senate Committees introduce new bills offering various gambling expansion ideas. These bills either promote more slot machines at already existing slot parlors in a particular state, or they promote table games at places where only slots are allowed, or they promote the introduction of casinos in states where there are currently none.

Commercials for state run lotteries can be seen daily on television and heard continuously on the radio throughout the US. And with Las Vegas and Atlantic City being the biggest part of this culture, there is little escape from it. No other country sees gambling as a natural part of its past time as much as the US.

So it can be logically deduced that the EU will eventually go after America for the same reasons they are going after Hungary, Denmark, and Finland.

As yet there have been no remarks in reaction to this EU ruling from anyone of significance in the US, but keep checking back here for the latest updates as they unfold.

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NETELLER plans return of US Customer's Funds

A Press release today on NETeller website reads;

The NETELLER Plc Group (LSE: NLR), the leading global independent online money transfer business, today announced that it has signed agreements with each of the United States Attorney’s Office for the Southern District of New York (“USAO”) and Navigant Consulting, Inc. (“Navigant”).

On 8 February 2007, the Group announced that it was in discussions with the USAO to manage an orderly return of funds to US customers and that it was contemplated that a forensic accounting firm would be engaged, at the Group’s expense, to assist in this process and to examine the Group’s financial position.

The Group is pleased to announce that on 20 March 2007, it signed agreements with the USAO and Navigant which, among other things, outline terms and a timeline under which NETELLER will work toward the orderly distribution of funds to its US customers. Per the agreements, the Group anticipates that within the next 75 days it will announce a plan by which the funds will be distributed to US customers. Navigant will also provide a report to the USAO on the Group’s current financial condition.

“We continue to be committed to returning funds to our US customers and working with the US Attorney’s Office,” said Ron Martin, Group President and CEO. “Progress, while not always visible to the outside observer, has been steady and these agreements mark a milestone in the process.”

NETELLER is continuing to cooperate with the USAO’s investigation, under the advice of its legal advisers and in accordance with court orders in the Isle of Man.

Further updates with relation to the US situation will be made as soon as there are any material developments. In the meantime, US customers should visit updates.neteller.com for more information, including newly updated FAQs that provide additional clarity, where the Group is able, around certain issues currently being raised in a number of public forums. Additionally US Customers can contact NETELLER Customer Service on the web or by phone at 1-888-258-5859.

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Gambling firms not encouraged by UK betting tax

Gambling firms and casino operators were left disappointed by Wednesday’s budget after Chancellor Gordon Brown slapped higher tax on large casinos and did little to tempt Internet gambling onshore.

Internet gambling firms looking to locate back to Britain from tax havens such as Gibraltar and Cyprus were left disappointed after Brown set the Remote Gaming Duty in line with land based bookmakers and bingo firms at 15 percent. Many had believed it would be as low as 2 or 3 percent.

“The Remote Gaming Duty has been set breathtakingly high, it will do nothing to attract the existing offshore industry onshore and it may indeed have the contrary effect,” said BDO Stoy Hayward tax principal Martin Dane.

“With the additional VAT and corporation tax for most companies, it would be almost impossible for a UK-based operation to compete with offshore businesses, especially those located in other EU jurisdictions,” said Remote Gambling Association chairman John Coates.

“This decision means that the UK has effectively turned its back on the industry,” he added.
Casino operators were also dealt a blow after Brown scrapped the lowest tax rate for the smallest casinos and created a new, higher, 50 percent tax band for the most profitable ones.

The move also means firms hoping to win the right to run any of Britain’s planned new wave of 17 Las Vegas style casinos will have to do their sums again, and may well be discouraged from bidding to run any of them.

It would seem that the government is going to take the maximum rake out this in terms of revenue raising.

Louisiana drops warrant on former Sportingbet chairman

Emerging on many reliable news sources, is the news that the State of Louisiana, which led the crackdown on internet gambling last year, has unexpectedly backed down, dropping all warrants against former Sportingbet chairman Peter Dicks and ‘all related warrants’.

Shares in all online gambling companies jumped on the news, raising hopes that the prohibitionist zeal of America was waning. Warrants against up to 58 other online gambling executives are believed to still be live, but various US sources say they are close to being dropped.

“If they really are all dropped, this is good news,” said Clive Hawkswood, the head of the trade body Remote Gaming Association.

Sportingbet issued a short statement to the Stock Exchange, saying: “Sportingbet is pleased to report that it has reached an amicable resolution with the St Landry District Attorney in the State of Louisiana. All related warrants issued by the Louisiana State Police have been cancelled with immediate effect. Both Sportingbet and the St Landry District Attorney now consider the matter closed.”
A spokesman for the company could not say if any money had been paid to the state to resolve the issue. “We are bound by confidentiality agreements with the Louisiana State police,” he said. US lawyers said a payment was usual in these circumstances.

He did confirm, however, that as well as Mr. Dicks being cleared, other Sportingbet executives, including chief executive Andrew McIver, were in the clear. “Whether he’ll get on a plane to the States is another matter,” he said.
Louisiana was the most zealous of all the US authorities chasing gambling companies. It scored a notable victory when it arrested Mr. Dicks in New York, but was frustrated in its attempts to extradite him from there. Mr. Dicks was allowed to fly home to the UK.

A few hours later the US Senate outlawed online gaming, taking the industry by surprise and wiping billions off the share prices of PartyGaming, 888, Sportingbet and other UK companies.

Yesterday, Neteller, which offered payment systems for online gambling companies, said it had reached agreement with the Southern District of New York to hand back money that had been frozen in its customers’ accounts. Within 75 days it will transfer $55m (£28m). It said this was not part of a plea bargain over the arrest of two founders of the company.

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