There is a connection between the new crackdown on online poker sites and the troubled U.S. banking sector. It is easier for a criminal organization such as a poker web site to trick banks into laundering money for them when the banks’ internal controls are frayed by financial stress. And it is easier for a multi-millionaire to make a deal with a bank that involves shady financial transactions when the bank is short on capital and has nowhere else to turn.
Yesterday morning a senior executive at a Utah bank was one of the people arrested and charged in an online poker money-laundering scheme. Two of the poker sites, working together, made a deal with the officer which involved “purchasing” the bank (actually just an ownership share) for $10 million and paying a private fee (one wonders whether it could be characterized as a bribe) to the officer. In return, the bank looked the other way as it processed transactions destined for the illegal web sites.
No one else at the bank has been charged, but I have to wonder how much of a future the bank has. In the past, banking authorities have sometimes shut down financially troubled banks almost as soon as criminal investigations became public. But in other cases banks have remained open after their corrupt executives were removed by regulators.
There is little doubt that some of the defendants in the case will cooperate with the authorities, and as a result, this investigation is likely to go much further. The U.S. executives of the illegal poker sites are in obvious trouble, but don’t be too surprised if it turns out that executives of some of the apparently legal sites operating in other countries were also involved in the same money laundering schemes, and end up in U.S. jails. It has happened before.
