For the players, it was an unexpected shock when notices suddenly
went up on the Neteller site abruptly advising that "with
immediate effect" all US player transactions with online
gambling sites would be banned (see previous InfoPowa report) But
Reuters reported today that the Isle of Man-based e-wallet had been
planning such a move since November.
The revelation immediately begs the question: "If this
move has been in process for so long, why weren't players notified
in advance and given a window of opportunity to clear their accounts
instead of the current scramble?" Investors may be asking
the same question as they face a share that has already endured a
60 percent nosedive since last October and is now suspended at the
request of the company.
Fellow payments processor Citadel has also announced its official
and equally abrupt exit from the US market.
The (for some sudden and surprising) move by Neteller came two days
after founders and former directors Stephen Lawrence and John Lefebvre
were detained by US authorities and charged with money laundering
related to online gambling.
Reuters quoted a Neteller statement as commenting: "Today’s
withdrawal from the US market by Neteller is the culmination of months
of careful planning.
"Along with this action, the group is actively assessing what
further steps it may take in light of the two arrests made earlier
this week to clarify the company’s position in this matter.
"These decisions will allow the group to focus on opportunities
available in the growing markets of Europe, Asia and the Americas
outside of the United States."
The company added that all US customer funds were held in segregated
accounts and were fully secure and are “available for withdrawal
by customers on demand”.
In its statement today, Neteller said the group had experienced slowing
fourth quarter growth in terms of receipts and new customer sign-ups.
It said it would continue with its focus on geographic diversification
through further product launches in Europe and Asia.
The statement added that US customers made up 76 percent of its active
customers in the fourth quarter. Of new sign-ups over the period,
74 percent were from North America.
Average daily receipts for the fourth quarter stood at US$5.75 million.
Average daily new customer sign-ups were 3 493. Revenue for the full
year was expected to fall between US$255 million and US$260 million.
The loss of the US market could mean an overall dip in revenues of
65 percent or more.
Neteller spokesmen revealed that the company has already taken steps
to develop country blocking software.
The Citadel news came in a statement by parent Canadian company ESI
Entertainment, which said the move came “...in light of
recent US Department of Justice enforcement actions against financial
processor executives”.
US customers contacting Neteller support for withdrawal information
were advised to take out a Neteller card for use in ATMs - not a popular
option due to the heavy charges the processor levies. Alternatives
are the EFT and check withdrawal options. However, due to the anticipated
backlog there will be a 2 week delay for EFTs and 6 week delay for
checks, players were told.
The delays in activating these options caused several players to remark
that for a crisis which had been foreseen this did not indicate very
good organization and planning.
U.S. prosecutors, using mainly the company's own transparent information
as a public company, claimed that Neteller processed more than $7.3
billion in transactions in 2005 and more than 95 percent of its revenue
from transfers involved Internet gambling.
From the point of view of vulnerability to arrest by US officials,
most online gaming executives and founders have shunned traveling
to or through the United States since the arrest of Bet on Sports'
David Carruthers and the later detention of Sportingbet's chairman
Peter Dicks last year.
However Neteller's Lawrence and Lefebvre, who together founded the
company in 1999, apparently did not heed the warnings of other executives.