"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 firm said in a statement.
"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."
Neteller is currently in the throes of negotiations with US Department of Justice officials who arrested two of the e-wallet's founders in January whilst they were on U.S. soil. The subjugation of Neteller is being hailed in enforcement circles as an important success for the application of the Unlawful Internet Gambling Enforcement Act enacted late last year by the US Congress and targeted on disrupting financial channels for online gambling sites.
The company froze all Neteller US accounts, withholding money from many thousands of US players, a situation that persists to this day.
Neteller's press release contains more detailed information, and is likely to be criticised for its short notice to players. It announces:
"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 [legal and regulatory] 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.
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. (Editorial comment: it is understood that these represent a very small percentage of Neteller's business.)
Customer funds
"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.
Turkey excluded
"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."
Financial impact and staff situation
Clearly anticipating some disappointing financial news for investors, Neteller, who's shares remain suspended, says that the Canadian business of the Neteller Group would likely have contributed significantly to its revenue and profitability during 2007 and the loss of this business is now likely to have a material negative impact on group 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," it adds.
The e-wallet, which has already made significant staff reductions as a result of the US situation, does not anticipate making further "significant" cuts 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," the announcement says, but its 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."
Clarification on US player funds
The announcement ends rather ominously with a clarification of an earlier release US players that it would soon announce a plan for the payout of their frozen funds:
"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." This is cold comfort to US players, who's monies have been frozen since January.
REALTIME GAMING SALE (Update)
Is the buyer a current licensee?
Several online gambling portals speculating on reports that turnkey provider and online gambling software developer RealTime Gaming has been sold suggest that the buyer may be an existing licensee.
The reports come in the wake of an InfoPowa report from a former insider, who claimed that the sale was effective in January and that the company will be moving to Costa Rica with those employees who elect to leave its current Atlanta base.
Our source has since claimed that CEO Michael McMain is remaining with the company and is about to move to the new South American base.
Point-Spreads.com claimed that a reliable source has informed that "a large internet gambling company and current licensee" has purchased the source code and programming team of Realtime Gaming (RTG). The portal says that the new ownership's plan for RTG is unknown at this time."
CANADIAN PROVINCES SHOULD NOT BE INVOLVED IN LOTTERIES
Canadian media reacts to scandals involving retail ticket sellers
Friday's news that the CEO of the Ontario Lottery and Gaming Corporation, Duncan Brown has resigned just days before the release of an official enquiry into allegations that ticket sellers in the province are winning a disproportionate number of prizes (see previous InfoPowa report) continued to attract media comment this week.
The OLG announced Brown's departure Friday, saying: "By mutual agreement, Duncan Brown and the Board of OLG have decided a change of leadership is appropriate. Brown has stepped down from his post as CEO."
The corporation has been under scrutiny in recent months over claims that ticket sellers win more prizes than they should.
Ontario ombudsman Andre Martin launched an investigation and is expected to report the results today (Monday).
Writing in the CFP, associate editor and columnist Arthur Weinreb gives some background to the issue.
"Lotteries throughout Canada are coming under fire," he opines. "It began in Ontario after the CBCs The Fifth Estate reported that owners and employees of retail stores that sell tickets claimed about 200 times the number of wins that ordinary patrons did.
"Last week this scandal had spread to Atlantic Canada province. Retailers were found to have won 10 times the amount that statistics estimated that they should have won. A spokesman for the Monckton N.B. Atlantic Lottery Corp. said that 25 wins of $25 000 or more are now under investigation. Investigations are also underway in [the Canadian province of] British Columbia
"The president of the Consumer Association of Canada, Bruce Cran, is calling for the RCMP to probe the high amount of wins by lottery retailers. Cran said, They [retailers ticket sellers] shouldn�t be allowed to buy tickets at all."
"Ontario's government run lottery corporation, the OLG, has come under
fire for reasons other than for improper and fraudulent payouts. Formerly known
as OLGC, the government spent $6 million of taxpayers' hard earned money to drop
the dreaded "C" from the companys moniker; for reasons none of us are really clear about. It's a safe bet that no one other than a few government bureaucrats with way too much time on their hands really understands why OLGC just had to change its name to plain old OLG. This change was nothing less than a shameful gouging of Ontarians," Weinrib claims.
"Back in the olden days, when federal Finance Minister Jim Flaherty not only held the same position with Ontario but was actually a conservative, he espoused the theory if something could be advertised in the Yellow Pages the government shouldnt be doing it.
"[Now] there is no one around who will argue that Ontario should get out of the lottery business. Current Ontario PC leader John Torys solution to the problems of OLGC -C is to throw good money after bad and conduct a forensic audit. And then what? Well, the lottery will go back to business as usual.
"Moves are underway south of the border to privatize state run
lotteries, albeit for different reasons. Illinois, Indiana and Texas are among
the states that are thinking about selling their lotteries in order to bring
money to their cash starved states. If a state sells or leases their lottery,
they get a large infusion of cash upfront, together with yearly royalties. John
Filan, the chief operating officer of Illinois said, This is fundamentally a
retail business and governments are not equipped to manage retail businesses.
Gaming is getting so competitive around the world that were worried our revenues
could go down unless there is retail expertise to run the lottery.
"Problems such as store owners and employees cheating could happen in the private sector too. But governments have no power to remedy the situation in a timely fashion. There will be discussions, debates, likely an investigation by the RCMP who are still investigating the 1985 Air India crash but any meaningful change to the way lotteries are run will be years away. In the meantime, nothing will change.
"Governments should simply get out of the lottery business and allow it
to be run by people who not only know what they are doing but dont have the time
to sit around debating whether or not a "C" should be dropped.
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