London (CNSNews.com) - As betters here continue to wager heavily on Tuesday's midterm elections in the U.S., a report commissioned by the British government has warned that online gambling could facilitate international money laundering operations.

Not only could criminals use them as fronts to cleanse illicit funds by paying them out as winnings, but legitimate sites could also be hijacked by criminals - who would use their online accounts as places to temporarily stash ill-gotten gains, it said.

The report, commissioned by the government and compiled by RSe Consulting of London, warned that a money-laundering "arms race" could develop between criminals and law enforcement agencies over online betting sites, with each side developing more and more sophisticated ways to hide and trace dirty money.

Over the past several years, U.S. federal authorities have indicted several owners of offshore betting sites on money laundering charges, including one in Costa Rica linked to alleged members of the Bonanno crime family of Brooklyn.

As of last month it is illegal for any American bank or financial institution to process credit card payments from online betting sites. British government ministers said last week that they would not fight efforts by the U.S. to extradite British citizens over these types of offenses.

Taking wagers has been legal in Britain since the 1960s. and several of the long-established bookmaking companies run their own online betting sites.

However, these sites do not accept bets from American citizens. John Hagan, an English lawyer who specializes in gaming law, said that he doubted that the U.S. government would go after them.

"There's a long list of companies [outside the U.K.] who are glad to take bets from U.S. customers," Hagan said Friday. "I would suggest they go after those companies."

Brian Wright, a spokesman for the Remote Gambling Association, said it was extremely difficult in practice for online betters to launder money through their accounts. The threat was greatly exaggerated, he added.

Although the association applauded the government's moves to open up the country to online gambling, he said that most companies would still be scared away from Britain by its relatively high taxes.

Despite the concerns about criminals taking advantage of online gambling, Britain's
Culture Minister Tessa Jowell said she would welcome more online betting sites setting up in the country, provided they were properly regulated and policed.

The U.K. currently has only some 70 online betting sites - a small sliver of the worldwide market.

"We will welcome them here because we believe that by allowing those who want to gamble to do so over the counter, not under the counter, is the best way to protect children," Jowell told an international gambling summit last week.

Despite her enthusiasm, delegates from the 33 nations at the summit were unable to agree on a basic framework under which online gambling sites would be regulated.

Amid the debate, thousands of British betters continued to place bets on the outcome of Tuesday's U.S. midterm elections.

Tony Calvin, a spokesman for Betfair, an online betting exchange, said betting on Senate and House of Representatives races was brisk - though nothing compared to the last presidential election.

Betting on American elections has become an especially popular pastime among people involved in British politics. As of last week, Calvin said that most betters have been wagering heavily on the Democratic Party faring well.

"The money has been all one way," he said. "It's going for the Democrats."

Subscribe to the free CNSNews.com daily E-brief.

Send a Letter to the Editor about this article.