NETELLER BARS TRANSFERS TO GAMBLING SITES FOR U.S. PLAYERS

Funds are held in seperate independent trust accounts and are safe, says e-wallet.

It appears that Isle of Man based Neteller has caved in to pressure from the US Department of Justice, exerted through the recent arrests of ex-founding directors Stephen Lawrence and John Lefevre. The e-wallet company has put up a notice advising US players that effective immediately they will not be permitted to make transfers to or from online gambling sites.

The following is the content of the notice, which is followed by a FAQ explanatory column. The ban does not affect non-U.S. users:

"US member update

"Effective Immediately

"Due to recent US legislative changes and events, effective immediately, US members are no longer able to transfer funds to or from any online gambling sites.

"All US members will continue to be able to use their NETELLER e-wallet account to safely transfer funds to and from non-gambling merchants and are not required to close their account or withdraw their funds.

"Please note that we are experiencing higher than normal support volumes and recommend that you read the FAQs for more information."

The final sentence in the note gives an indication of the consternation and panic that the announcement clearly caused among American players particularly, but other users are posing worried questions and comments on the Internet this morning.

In an FAQ following the announcement, Neteller explains: "The US government has recently introduced new legislation in the form of the Unlawful Internet Gambling Enforcement Act. To best protect the interests of NETELLER members, employees, shareholders and business partners, NETELLER will no longer provide service to US members to transfer funds to and from online gambling merchants. Read the press release." The press release refers to the arrest of the two ex-directors this week.

The FAQ also deals with continued use of US players' accounts, assuring them that immediate withdrawal is not required and that "All US members and non-US members will continue to be able to use their NETELLER e-wallet account for safe online transfers to and from non-gambling merchants, secure peer-to-peer transfers and NETELLER Card withdrawals at ATMs around the world."

Unfortunately the choice of "non-gambling merchants" offering Neteller is almost non-existent; the company depends heavily on gambling related transactions.

Neteller also advises on the safest and quickest ways to make withdrawals: "The NETELLER Card is the quickest and most convenient withdrawal option. When you transfer funds from your NETELLER e-wallet account to your NETELLER Card, you can withdraw those funds from any ATM cash machine on the Cirrus/Maestro network and Pulse Star network, depending on your country of residence. You will have to pay a nominal fee for NETELLER Card withdrawals, but your funds will be available from 15 minutes to an hour after they are transferred to your card."

Company support personnel advised that US players could still use EFT and check withdrawal options to clear their accounts if desired. However, due to the anticipated backlog there is likely to be a 2 week delay for EFTs and 6 week delay for cheques.

Perhaps the most burning question of account balance safety is addressed, too: "...your money is safe with NETELLER. All members can hold their funds safely in their NETELLER accounts until such time as they decide to move the funds.

"NETELLER protects all members funds (all deposited, in-transit and un-cleared funds) by holding the value in independent trust accounts. As the largest independent online money transfer business in the world, we maintain our head office in Europe and are a publicly quoted company on the AIM market of the London Stock Exchange. NETELLER UK Ltd is authorised and regulated by the Financial Services Authority."

There was immediate criticism from US players at the abrupt nature of the US ban, which gave players no time to clear their accounts to and from gambling sites. Neteller accounts are not interest bearing, and card charges are perceived as being high, which created further bitterness to the perception that US players were being summarily abandoned.

Anger at the US authorities for precipitating the disruption and concern was also being expressed.

The US government and Congress's focused actions against online gambling when many other forms of gambling are allowed to flourish, and online operations of horse racing and lottery organisations are encouraged by exemptions from the legislation, will continue to raise temperatures.

This has been exacerbated by the zealous manner in which authorities continue to arrest individual executives and damage companies, especially public companies susceptible to the fears of investors, in other countries.

Opinions are divided on whether Neteller can survive the ban on American players, whose business comprised around 70 to 80 percent of its revenues.

Perhaps forseeing this week's dramatic turn of events, the company has for the past 18 months or more been vigorously developing other geographical markets in Europe and Asia. It has substantial resources and reserves, and if investors keep their nerve it has a strong chance of coming through the crisis as a definitely smaller but still successful Internet financial services company.

For US players, their worse fears that Neteller will abandon them have been realised and their ability to spend their money on a pastime of their choice has been further restricted, primarily by the actions of their own government.

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