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Rise in Central America, Caribbean Gambling Operations Concern Authorities - 2003-01-26

Many people in the United States gamble online through companies based in Central America or the Caribbean. Offshore gambling operations are becoming a matter of concern for law enforcement agencies.

For Costa Rica, the establishment of online gambling operations here has been both a blessing and a curse. The lucrative operations offer good jobs to many Costa Ricans and thereby help the nation's economy.

Adriana is a college student who worked for a time at a sports betting house phone-call center. She says the work pays well and offers flexible hours.

"I think it was the best for young people because we had time to do whatever we wanted," she said. "I could study there. I could talk, I could do whatever I wanted there. All the other people, too. You could read or do whatever you wanted because the phones ring once every 10 minutes."

She says she never saw anything at her place of work that looked illegal, but that she did hear stories that concerned her. She is now seeking work at a customer service center with no gambling connections.

Law enforcement authorities in Costa Rica and the United States have also heard stories, and are concerned these operations could be utilized by drug smugglers, mafia families, and even terrorists.

An article in the La Nacion newspaper accuses an associate of one online betting company, a U.S. citizen named Frederick Kelch, of having ties to New York's Gambino crime family. The newspaper identifies Mr. Kelch as an ex-convict and also displays a portion of a court document from Florida that shows he was under investigation for illegal gambling and other charges in Florida and New York.

This online sports betting operation is based in one of San Jose's most popular commercial centers, the San Pedro mall. Shoppers wandering through the mall may not even notice that the gambling operation is there. For the most part, Costa Ricans are unaware of what these companies are doing.

Most of the more than 200 so-called "sports books" operations are registered as data processing companies and call centers. U.S. officials say these companies have located in Costa Rica because of lax banking laws and even more lax enforcement.

U.S. officials have expressed concern that such offshore operations could be used for money laundering schemes. The United States has several extradition requests in Costa Rica for fugitives with links to these offshore gambling operations.

Costa Rican authorities are investigating possible illegal transactions such as transfers of millions of dollars from sports books companies through Costa Rican banks.

But efforts to crack down on what some officials estimate to be a $6 billion worldwide industry could create new problems. A bill before the U.S. Congress would tighten restrictions on use of credit cards, electronic fund transfers, wire transfers, checks, money orders and other methods of payment for Internet wagering.

But experts in international finance say this could lead to the creation of other payment schemes that would be very difficult to track and open the way for even more illegal activity.

Spokesmen for the online betting industry say the creation of a global system of untraceable payments could help criminals and terrorist groups move money around. They say it would be far better for the internet gambling industry as well as for law enforcement agencies to have a regulated and transparent money transfer system in place for those who wish to place bets online.