Eggregatious Copyright Violations

[Ronald Raygun Remailer]

Smart Card Bulletin: October 1996
 
To Regulate or Not to Regulate? 
 
By Theodore Iacobuzio 
 
US banking regulators are seeking comment on whether, and under what
circumstances, it should take action over electronic money. 
 
Though US banking regulators are focusing more and more of their
attention
on smart cards, most insiders both at banks and at advocacy groups say
they
are not overly concerned with the degree of scrutiny the new technology
attracts. 
 
In fact, contradicting recent alarmist press reports, they told CI they
were
glad the federal government has decided to call for comment. Through a
process of public hearings and forums beginning last month, two powerful
federal agencies sought to air important regulatory issues involving all
aspects
of electronic money, with a special emphasis on smart cards as among the
most mature technologies. 
 
It is all part of an effort to find out more about the new payment system
now,
rather than later, when it is up and running. This way, according to the
government, the industry can both educate the regulators and address
their
concerns before the market has become too established to change easily. 
 
"The regulatory agencies are actually working quite well to understand
the
technology and not to rush to regulate," said Catherine Allen, president
of the
Santa Fe Group, a New Mexico-based electronic commerce think-tank and
the former head of Citicorp's smart card initiative and board member of
the
Smart Card Forum. 
 
"The hearings are being held to get the issues into the open," Allen
said. "I
don't sense heightened concern from the industry." 
 
In fact, many smart card insiders more suspicious than Allen were
considerably mollified having heard Treasury Secretary Robert Rubin
address an agency-sponsored forum on electronic money on September 19. 
 
The forum, which attracted some of the nation's top bankers, concentrated
heavily on smart cards. In his keynote speech, Rubin explicitly sought to
restrict government's role in the new technologies to issues of law
enforcement: fraud, money-laundering and privacy.
 
"As we think about these concerns, let us put aside our ideological views
with
respect to regulation and take an intensely practical approach to finding
the
right balance so that we can minimise impediments to growth and at the
same
time meet the needs that I just described," Rubin said. 
 
"It seems to me that as we look at the benefits and ask the questions, we
must achieve two objectives at the same time: minimising impediments to
the
growth of electronic money, but at the same time, address the difficult
issues
it raises in an appropriate fashion. 
 
"To some extent, there may be trade-off judgements that will have to be
made, but I believe to a large extent the meeting of these two objectives
will
be complementary." 
 
Rubin said that electronic money should increase, rather than decrease,
access to financial services and the mainstream economy for those in the
inner cities or poor rural areas. 
 
"This is a great challenge and I think an absolutely critical challenge
given 
that these groups lack access to computers, financial services and many
of the
benefits of our modern economy". But his comments were so vague as to
limit any discussion of possible US government intervention. 
 
While the Treasury Department meeting was also notable for Citicorp
chairman John Reed's assertion that the Internet is not yet secure enough
for
banking transactions, its major effect was to reassure most smart card
insiders not to expect any aggressive move by the US government to
regulate
smart cards. 
 
On the contrary, they felt the federal government's hitherto hands-off
approach is a textbook example of how regulation of a new technology
should proceed. 
 
The latest efforts at regulatory clarification come not from the Treasury
Department, but from the Federal Deposit Insurance Corporation (FDIC),
the US banking agency established during the Great Depression that both
insures bank deposits of up to $100,000 and oversees the safety and
soundness of banking practices. 
 
The agency has sought comment on whether the funds underlying smart cards
are deposits and hence insurable under the law. It has also issued its
own
opinion that for most purposes, funds underlying smart cards are not in
fact
insurable. 
 
So eager is the FDIC to air the issue, that it took the unusual step (for
a bank
regulatory body) of calling a public hearing on September 12 in
Washington. 
 
There, banks, technology vendors, card associations and industry groups
aired their opinions. And indeed, most of the bankers commenting pleaded
with the government to let the market grow before imposing any kind of
rigid
regulatory structure. 
 
The Federal Reserve Board raised a thornier issue when it recently sought
comment on its effort to exempt from Regulation E those stored- value
cards
bearing less than $100 in value. Reg E, as it is called, establishes
banks'
responsibility for providing an audit trail for money moving through the
electronic funds process. 
 
"This is sort of technical bank-lawyer stuff that people are going to
have to
know about but that is going to have very little effect on how the market
develops as a whole," said John Wright, vice president and senior counsel
with Wells Fargo Bank and head of the legal and public affairs policy arm
of
the Smart Card Forum, the leading industry advocacy group. Regarding the
FDIC request for comment, he said:"It depends how you structure it. I
dont
think that at the level of what consumers are going to do, they would be
deposits." 
 
Wright added that as it was proposed, he did not think the Reg E piece
represented something people ought to worry about.
 
 


New York Times: Monday, October 28, 1996
 
Regulators Vexed By Gambling Over Internet 
 
By JAMES STERNGOLD
 
There are few patches of legal turf the states guard more fiercely than
gambling, which is why it seemed strange this summer when the National
Association of Attorneys General urged the federal government to seize
control of wagering on the Internet -- even though hardly anyone was
doing
it. 
 
Even more bizarre was that the recommendation, including an alarming
proposal for arresting gamblers from in front of their computers, was
turned

down by the Justice Department.
 
``The department does not agree that federal law should be amended so
broadly as to cover the first-time bettor who loses $5, particularly when
Internet gaming is expected to mushroom and federal resources are
shrinking,'' John C. Keeney, an official in the criminal division at the
Justice
Department, wrote the states. 
 
The episode highlighted the growing anxiety and confusion over one of the
least developed, but potentially most vexing areas of Internet business -
gambling. The reach of the World Wide Web is erasing not only borders but
also the ability of the authorities to control wagering (not to mention
their
ability to tax it). And gambling over computer networks is still new
enough
that it remains unclear exactly what is legal and what is not. 
 
``We built it to be Russian-proof, but it turned out to be regulator
proof,''
said Craig I. Fields, the former head of the Pentagon agency that helped
create the Internet during the cold war, and who is now vice chairman of
Alliance Gaming, a Las Vegas concern developing on-line gambling.
 
In principal, gambling by computer sounds promising, placing an
increasingly
popular habit, which can quickly become a compulsion for some
individuals,
within just about anyone's reach. Indeed, nearly every worker in the
country
with a personal computer and a few minutes to spare will soon be able to
slip
in some blackjack, poker, slots or baccarat for money at almost
completely
unregulated, virtual casinos. 
 
To give some notion of the potential, Americans wagered $550 billion last
year at traditional operations, from lotteries and horse races to bingo
and
casinos, and gambling companies had revenues of $44.4 billion. The
Internet
operators need to take only a fraction of that business to produce
explosive
growth - or explosive scams. 
 
``In my view, gambling is the fastest way to destroy the credibility of
the
Internet system,'' said John Kindt, an economics professor at the
University
of Illinois at Champlain and a gambling critic. ``If you lose you'll
lose, and 
if you win you could lose because there's no way to collect from these
offshore
operations.'' 
 
He added that with personal computers now ubiquitous the on-line casinos
could prove a devastating temptation for the growing numbers of
compulsive
gamblers. ``People will be trapped,'' Kindt said. ``They won't be able to
get
away from it.'' 
 
All that is driving some law enforcement officials crazy, especially
since the
business, though made up of a tiny number of marginal companies operating
from offshore havens like Antigua, Belize and Monaco, is on the cusp of a
major expansion. A showdown, in short, is looming in the one area of the
Internet that may well produce billions of dollars of commerce in just a
couple of years. 
 
Minnesota has sued Granite Gate Resorts, a Las Vegas company preparing
to offer sports betting on-line, called Wager Net, as a test case,
claiming that
it is a consumer fraud because the service says, improperly, it is legal.
The
state court hearing the suit has yet to rule on whether the state has
jurisdiction. 
 
California is attacking by threatening the telephone companies with
prosecution if they do not cut off service to Internet gambling concerns
in the
state. 
 
Several states are also insisting that they will not recognize the use of

offshore
sites if the companies are attracting American gamblers. ``We're going to
take an aggressive stand on this and we'll interpret the law as broadly
and
prohibitively as we can, and there will be no havens,'' said Tom Gede, a
special assistant to the attorney general of California. 
 
Sen. Jon Kyl, R-Ariz., offered a bill earier this year that would have
made all
Internet gambling explicitly illegal. Although it was killed in
committee, he 
has insisted he will offer it again. A National Gaming Commission was
established
by the Congress this year and a big focus of the study it will be
conducting
will be on-line wagering, which could also lead to legislation. 
 
And there is an even trickier issue, some believe. 
 
``There's another I-word that really scares the government, Indian
gambling,''
said I. Nelson Rose, a professor at the Whittier Law School here and a
gambling law expert. ``If the Indian tribes get involved in this then the
way 
the law is written all sorts of sports betting and other kinds of on-line
betting
could take place from Indian lands in an unregulated fashion.'' 
 
That has left many state officials worried, but unwilling to just wait
for the
explosion. 
 
``The federal government is either going to want to get into it now or
they'll
be drawn into it later,'' insisted Hubert Humphrey III, the attorney
general of
Minnesota and a prime mover behind the request this summer for federal
involvement. ``This is moving so fast that we have to get out in front of
it.'' 
 
All these worries are over a business that is, at the moment at least,
underwhelming. Sue Schneider, managing editor of Rolling Good Times
On-Line, an e-zine that tracks the industry, said that there are fewer
than a
half dozen virtual casinos that are taking real bets at the moment, and
many of
the games are frustratingly slow. There are also unresolved concerns over
the
security of on-line transactions and whether an unlicensed casino would
maintain fair odds on the games. 
 
In fact, the established casino companies, while watching warily, appear
unfazed. ``My personal view is it's not very interesting,'' said Stephen
Bollenbach, chief executive of Hilton Hotels, the country's largest
casino
concern. ``It's a different business than we're in.'' 
 
Nevertheless, about 40 prospective operators have set up Web sites and
many offer games that, at some point in the future, could easily be
transformed into gambling for real money. 
 
Ms. Schneider said that as many as a dozen more on-line casino or
bookmaking operations may open for business within the next few months. 
 
While all the companies are seeking essentially the same thing - to get
into the
lucrative gambling business without the costs of building casinos or
having to
pay dealers or other high-priced staff - they are taking many different
approaches because of the murky legal status of the business and the
uncertainty over just who will really want to spend their money this way.

 
Virtual Vegas is one of the more active on-line casinos, and one of the
most
cautious. The company's formula is simple: treat Internet gambling as
another
type of computer game, and leave the money out of it for now to avoid
hassles with the police. 
 
David Herschman, chief executive of the company, which is based in the
hip
Venice district of Los Angeles, said Virtual Vegas had already spent $3
million developing its technology, and would spend another $10 million. 
 
It has created twists on traditional games to make them more like
computer
games, and therefore more appealing to the people who already spend
perhaps more time than they should in front of their personal computers.
Virtual Vegas offers Turbo Black Jack and Assault Poker, which is like
combining Doom and five card stud. Virtual Vegas will be available on
Time
Warner's cable on-line service. 
 
Peter Demos Jr., president of World Wide Web Casinos, which is based in
Orange County, said his company had decided to trust the idea that having
an offshore computer location will keep it out of jail. World Wide Web

Casinos has acquired a tiny casino on Antigua, the St. James Club. ``It
does
provide us with a little credibility,'' Demos said. 
 
He added: ``We want to be a huge grind joint. We're not going to attract
high
rollers. We're looking for someone who will blow $20 or so in an hour and
a
half.'' World Wide Web Casino, which will offer black jack, five kinds of
video poker and slots, is in testing and hopes to open around
Thanksgiving. 
 
Internet Gaming Technologies Inc., based in San Diego, is also using an
offshore strategy: It has a gambling license in Ecuador, acquired through
a
company registered in Monaco. 
 
Joseph R. Paravia, president of the company, said he is less confident in
the
offshore loophole, so the company will offer its games only to people
outside
the United States, which he insisted is technically feasible. Paravia
said the
company plans to pursue known gamblers, giving them computers if
necessary. ``We didn't want to take a propeller-head and have to teach
him
how to gamble,'' Paravia said. ``We want to go after a known market.'' 
 
You Bet International Inc., however is what might be called an
anti-Internet
Internet gambling company. The company, which will operate through the
New York Racing Association, offers a horse race bookmaking service that
makes only tangential use of the Internet: to register accounts and
download
software. 
 
``The Internet as it exists is the wrong place for this kind of
application,'' 
said Stephen A. Molnar, executive vice president of the company. ``The
biggest
problem is political. We believe that at some point the government is
going to
come down on this.'' 
 
You Bet, which expects to begin taking bets in February 1997, has
constructed a private on-line service over which its account holders will
get
information and place their wagers. And it appears to be legal, since it
operates within New York state parimutuel betting laws.
 
``It's all interesting, but most of what is being bandied about is hocus
pocus 
at
this point,'' said Jason Ader, an analyst with Bear Stearns & Co. ``It's
a very
scary situation. There's no regulation. There's tremendous potential for
abuse
out there, and maybe a little fun until then.'' 
 
 




News Release (NationsBank): Friday, October 25, 1996
 
NationsBank Announces Service For Trading New And
Used Stored Value Cards 
 
Antiques are too dusty. Model cars are old news. The hot collectible
today?
Stored Value Cards. 
 
NationsBank (NYSE: NB) today announced it will establish a collector
service to support an open, free and knowledgeable marketplace for
buying,
selling and trading new and used NationsBank Stored Value cards. 
 
"Many of our customers have told us that they wanted to collect our
stored
value cards," said Richard F. Shaffner, NationsBank Senior Vice
President.
"We want to respond by providing a professional service that our
customers
and the marketplace can count on for accurate information regarding the
production and availability of new and used NationsBank cards." 
 
The NationsBank Collector Service will provide a variety of services to
collectors: 
 
-- information about NationsBank cards and designs; 
 
-- card reproductions; 
 
-- information about how and where new and used cards may be purchased.
 
The service will also facilitate the sale of new and expired NationsBank
cards
to dealers and collectors. 
 
The bank has also established a set of Stored Value Card Principles that
it
plans to follow in producing and distributing its stored value cards. 
 
"NationsBank was the first bank in the United States to introduce VISA
Cash to the public in 1995, and now is the first card issuer to establish
and
communicate principles designed to protect customers who are card
collectors," said Shaffner. 
 
NationsBank Stored Value Cards provide customers the opportunity to
collect the first samples of an entirely new payment system.
 
The cards include the first VISA Cash card, the series of commemorative
VISA Cash cards from the 1996 Summer Olympic Games, and the
FANCash cards introduced by NationsBank at the 1996 Carolina Panthers
home games. 
 
"These cards are generating a great deal of interest among collectors,"
said
Shaffner. "Some $5 cards are already trading for as much as $300. We want
to make sure that card collectors know that NationsBank's principles for
the
collection of stored value cards are solid and well thought-out." 
 
NationsBank's principles for the issuance of stored value cards state the
bank's position regarding the availability, production, and the
dissemination of
information about each card design. 
 
NationsBank Card Services, with more than $8.3 billion in outstanding
loans,
is the llth largest issuer of Visa and Mastercard credit cards. 
 
NationsBank is the fifth-largest banking company in the U.S. with primary
retail operations in nine states and the District of Columbia. As of
September
30, 1996, NationsBank had total assets of $188 billion. 
 
 


 
Sunday Times (London): October 27, 1996
 
Banks Move into Online Robbery 
 
By David Hewson 
 
There are only two things you can guarantee of a British clearing bank.
First,
that avarice will be its primary motivating force. And second, that it
will
pursue this avarice with such naked stupidity that a three-year-old could
spot
it with his eyes closed. 
 
The announcement that Barclays has decided to enter the world of online
banking is a case in point. 
 
In principle, the idea of handling your finances through a home PC is an
interesting one. Provided the security is tight and there are enough
advantages
to justify the time online, I might even try it myself. But, not in
several 
million
years, the way Barclays has the cheek to suggest. If you want to join the
game, here is what the bank demands that you -- the customer, if I am not
mistaken - will need. First, a computer capable of running Windows 95 --
#1,000 will do nicely if your otherwise adequate 3.1 machines is not up
to
snuff. Second, a modem. Third, a copy of Microsoft Money 97 -- #29.99,
thanks very much. And fourth, a benign desire on your part to save
Barclays
internal transaction costs by doing the work yourself and adding the
ensuing
phone charges, probably long distance, to your BT bill. 
 
And what do you get in return? Well, you can check balances, transfer
money between accounts, settle bills and change standing orders -- all of
which is already possible through 24-hour, voice-based phone banking down
an ordinary line, for a local-call charge, and with someone who is paid
to tap
the keyboard. 
 
Oh, yes. You can also "analyse and display account history using the
in-built
graphics packages". Oh joy. Forget Doom. Let's watch the gas bill turn
from
bar graph to pie chart, all with a click of the mouse. So now you know
why
you bought a home PC... 
 
If more than a thousand or so deluded souls sign up for this package of
dross
I will be truly surprised. The general public may be happily ignorant of
the
more obscure parts of the personal computing world but they do understand
that there are just two reasons to run financial matters on a home PC. It
has
to make life easier, and it must extend your choice. 
 
All Barclays offers over 24-hour phone banking is the marginal curiosity

value of transferring your account information straight into a
personal-finance
package. And in return? You are locked into them with a proprietary
communications package that works with no other bank, and one, moreover,
that forces you to pay the Microsoft tax -- for Money 97 and Windows on
top. 
 
It is difficut to decide whether this is pure ignorance or simply
misguided
greed on Barclays' part. Even the banking industry must have heard of the
Internet. The ostensible reason Barclays has eschewed the Net is that it
is
inherently insecure. This is rather like saying aircraft are inherently
prone to
crash, regardless of how well they are maintained or flown. 
 
There is clear proof that the Net can be made sufficiently secure simply
in the
huge number of American banks now racing to open online services. Take a
look at the beautifully organised Bank of America service
(www.bankamerica.com) and judge for yourself. 
 
What's more, Net banking activities run through a Web browser, can talk
to
Microsoft Money as well as the more popular Intuit Quicken in ex actly
the
same way as Barclays' proprietary code. You get all the bar charts of
your
Visa bills and lose those leg-irons along the way. 
 
Only a bank could believe that it is offering some added value by
allowing
you access to your own money through a PC. The real service online
banking
will offer is beyond the understanding of Barclays. 
 
One day the Net will act as an active, independent, intelligent agent of
choice.
It will shop around for the cheapest loans, mortgages and savings
accounts
across a broad spectrum of providers. The inertia selling of bill-paying,
insurance and other financial services that featherbeds the clearing
banks
today will be gone once you find the magic button marked "Find
cheapest..."
on your Net browser. 
 
Barclays would do well to try to work out how it will survive in that
newly
competitive era instead of trying to enslave further its hapless, captive
customers just as the walls that imprison them start to come down.