FR4026_20150831_omb

Supporting Statement for
Recordkeeping Requirements Associated with Regulation GG
(Prohibition on Funding of Unlawful Internet Gambling)
(FR 4026; OMB No. 7100-0317)
Summary
The Board of Governors of the Federal Reserve System proposes to extend for three
years, without revision, the mandatory Recordkeeping Requirements Associated with
Regulation GG (Prohibition on Funding of Unlawful Internet Gambling) (FR 4026; OMB No.
7100-0317). On November 18, 2008, the Federal Reserve and the Secretary of the Treasury (the
agencies) published a joint notice of final rulemaking in the Federal Register (73 FR 69382)
adopting Regulation GG.1 Regulation GG includes requirements implementing applicable
provisions of section 802 of the Unlawful Internet Gambling Enforcement Act of 2006 (the
Act).2 The collection of information is set out in sections 5 and 6 of Regulation GG.3
Section 5 of the regulations requires all non-exempt participants in the designated
payment systems to establish and implement policies and procedures reasonably designed to
identify and block, or otherwise prevent or prohibit, transactions restricted by the Act. In
addition, section 5 states that a participant in a designated payment system may rely on policies
and procedures established by the designated payment system if the system’s policies and
procedures otherwise comply with the requirements of the regulation.
Section 6 of the regulations sets out non-exclusive examples of policies and procedures
for each designated payment system that the agencies believe are reasonably designed to prevent
or prohibit restricted transactions for non-exempt participants in the system. The Federal
Reserve is taking paperwork burden for an estimated 6,229 depository institutions, card system
operators, and money transmitting business operators for the regulation’s requirement to
establish and maintain the policies and procedures required by sections 5 and 6 of
Regulation GG. The annual recordkeeping burden for establishing and maintaining these
policies and procedures is estimated to be 50,108 hours.
Background and Justification
In general, the Act prohibits any person engaged in the business of betting or wagering
(as defined in the Act) from knowingly accepting payments in connection with the participation
of another person in unlawful Internet gambling. Such transactions are termed “restricted
transactions.” The Act generally defines “unlawful Internet gambling” as placing, receiving, or
otherwise knowingly transmitting a bet or wager by any means which involves the use, at least in
1

Compliance for Regulation GG was effective June 1, 2010 (74 FR 62687). The Treasury’s identical companion
regulation is found at 31 CFR part 132.
2
31 U.S.C. § 5361 et seq.
3
Section 802 of the Act requires the agencies to prescribe joint regulations requiring each designated payment
system, and all participants in such systems, to identify and block or otherwise prevent or prohibit restricted
transactions through the establishment of policies and procedures reasonably designed to identify and block or
otherwise prevent or prohibit the acceptance of restricted transactions.

part, of the Internet where such bet or wager is unlawful under any applicable Federal or State
law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise
made.4 The Act states that its provisions should not be construed to alter, limit, or extend any
Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling
within the United States.5 The Act does not spell out which activities are legal and which are
illegal, but rather relies on the underlying substantive Federal and State laws.
Description of Information Collection
The Act requires the agencies, in consultation with the U.S. Attorney General, to
designate payment systems that could be used in connection with or to facilitate restricted
transactions. Such a designation makes the payment system and non-exempt financial
transaction providers participating in the system subject to the requirements of the regulation.6
The Act further requires the agencies, in consultation with the U.S. Attorney General, to
prescribe regulations requiring designated payment systems and financial transaction providers
participating in each designated payment system to establish policies and procedures reasonably
designed to identify and block or otherwise prevent or prohibit restricted transactions. The
regulations must identify types of policies and procedures that would be deemed to be reasonably
designed to achieve this objective, including non-exclusive examples. The Act also requires the
agencies to exempt certain restricted transactions or designated payment systems from any
requirement imposed by the regulations if the agencies jointly determine that it is not reasonably
practical to identify and block, or otherwise prevent or prohibit the acceptance of, such
transactions.
Under the Act, a participant in a designated payment system is considered to be in
compliance with the regulations if it relies on and complies with the policies and procedures of
the designated payment system and such policies and procedures comply with the requirements
of the agencies’ regulations. The Act also directs the agencies to ensure that transactions in
connection with any activity excluded from the Act’s definition of unlawful Internet gambling
(qualifying intrastate transactions, intratribal transactions, or interstate horseracing transactions)
are not blocked or otherwise prevented or prohibited by the prescribed regulations.

4

From the general definition, the Act exempts three categories of transactions: (1) intrastate transactions (a bet or
wager made exclusively within a single State, whose State law or regulation contains certain safeguards regarding
such transactions and expressly authorizes the bet or wager and the method by which the bet or wager is made, and
which does not violate any provision of applicable Federal gaming statutes); (2) intratribal transactions (a bet or
wager made exclusively within the Indian lands of a single Indian tribe or between the Indian lands of two or more
Indian tribes as authorized by Federal law, if the bet or wager and the method by which the bet or wager is made is
expressly authorized by and complies with applicable Tribal ordinance or resolution (and Tribal-State Compact, if
applicable) and includes certain safeguards regarding such transaction, and if the bet or wager does not violate
applicable Federal gaming statutes); and (3) interstate horseracing transactions (any activity that is allowed under the
Interstate Horseracing Act of 1978, 15 U.S.C. § 3001 et seq.).
5
31 U.S.C. § 5361(b).
6
The Act defines “financial transaction provider” as a creditor, credit card issuer, financial institution, operator of a
terminal at which an electronic fund transfer may be initiated, money transmitting business, or international,
national, regional, or local payment network utilized to effect a credit transaction, electronic fund transfer, stored
value product transaction, or money transmitting service, or a participant in such network or other participant in a
designated payment system.

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Sections 5 and 6 contain information collection requirements. Details of the
requirements for each section are provided below.
Section 5. Section 5 of the final regulations requires all non-exempt participants in the
designated payment systems to establish and implement written policies and procedures
reasonably designed to identify and block, or otherwise prevent or prohibit, restricted
transactions. In accordance with the Act, section 5 states that a non-exempt participant in a
designated payment system shall be considered in compliance with this requirement if (1) it
relies on, and complies with, the written policies and procedures of the designated payment
system that are reasonably designed to identify and block restricted transactions or otherwise
prevent or prohibit the acceptance of the products or services of the designated payment system
in connection with restricted transactions, and (2) such policies and procedures of the designated
payment system comply with the requirements of this section. Regulation GG provides that,
unless notified otherwise by its regulator, a participant may rely on a written statement or notice
by the operator of the designated payment system to its participants 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.
Section 6. Section 6 of the final regulations sets out non-exclusive examples of policies
and procedures the agencies believe are reasonably designed to prevent or prohibit restricted
transactions for non-exempt participants in each designated payment system. Under
Regulation GG, non-exempt participants in each designated payment system should maintain
policies and procedures that (1) address methods for conducting due diligence in establishing a
commercial customer relationship designed to ensure that the commercial customer does not
originate or receive restricted transactions through the customer relationship; and (2) include
procedures reasonably designed to prevent or prohibit restricted transactions, including
procedures to be followed with respect to a customer if the participant discovers the customer
has been engaging in restricted transactions through its customer relationship. Also, the
participant may notify all of its commercial customers, through provisions in the account or
commercial customer relationship agreement or otherwise, that restricted transactions are
prohibited from being processed through the account or relationship.
Time Schedule for Information Collection
The final rule implementing Regulation GG does not include a specific time period for
record retention, however, non-exempt participants would be required to maintain the policies
and procedures for a particular designated payment system as long as they participate in that
system.
Legal Status
The Board’s Legal Division has determined that section 802 of the Unlawful Internet
Gambling Enforcement Act (31 U.S.C. § 5364 (a)) authorizes the Board to require the
information collections set out in Regulation GG. The rule requires covered payment system
participants to adopt policies and procedures, but does not require them to be submitted to the

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Board, so normally no confidentiality issues would be implicated. To the extent the policies and
procedures were obtained by the Board through the examination process, they could be afforded
confidential treatment under exemption 8 of the Freedom of Information Act (5 U.S.C. §
552(b)(8)). In addition, commercial and financial information contained in these information
collections may also be exempt from disclosure under exemption 4 (5 U.S.C. § 552(b)(4)), if
disclosure would likely have the effect of (1) impairing the government’s ability to obtain the
necessary information in the future, or (2) causing substantial harm to the competitive position of
the respondent.
Consultation Outside the Agency
Regulation GG, including the collection of information and paperwork burden estimate,
was promulgated jointly with the Department of the Treasury in accordance with the notice and
comment procedures of the Administrative Procedure Act (5 U.S.C. § 551 et seq). On June 9,
2015, the agencies published a joint notice in the Federal Register (80 FR 32559) requesting
public comment for 60 days on the extension, without revision, of this information collection.
The comment period for this notice expired on August 10, 2015. The agencies did not receive
any comments. On August 28, 2015, the Federal Reserve published a final notice in the Federal
Register (80 FR 52279).
Estimate of Respondent Burden
The total annual burden for the FR 4026 is 50,108 hours, as shown in the table below.
The Federal Reserve estimates that the burden of maintaining the policies and procedures once
they are established is 8 hours per year for all recordkeepers. The Federal Reserve estimates that
the burden of maintaining the policies and procedures for de novo institutions is 100 hours per
year. The agencies have agreed to split equally the total number of record-keepers not subject to
examination and supervision by either the Federal Reserve Board or the Treasury’s Office of the
Comptroller of the Currency. These recordkeeping requirements represent less than 1 percent of
total Federal Reserve System paperwork burden.

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Estimated
average hours
per response

Estimated
annual burden
hours

Number of
respondents7

Annual
frequency

Depository institutions

3,039

1

8

24,312

Card system operators

7

1

8

56

3,170

1

8

25,360

Money transmitting
business operators

10

1

8

80

De novo institutions

3

1

100

300

FR 4026

Credit unions

50,108

Total
The total cost to the public is estimated to be $2,593,089.8
Sensitive Questions

This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The annual cost to the Federal Reserve System for collecting this information is
negligible.

7

Of these respondents required to comply with this information collection, 2,649 depository institutions and card
system operators, 2,715 credit unions, and 8 money transmitting businesses are considered small entities as defined
by the Small Business Administration (i.e., entities with less than $550 million in total assets)
www.sba.gov/content/small-business-size-standards.
8
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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