can an online site demand photocopy of my cc?

[PokerPaul]

got this rather strange email from my regular site..

"We are writing to inform you that according to your country's legislation, we cannot credit winnings back onto your credit card and therefore, we recommend you set up a Neteller account.
The credit card option has been disactivated from your account and for security reasons we kindly ask you to send us the photocopy of the credit card and an id document to the fax:

Your future withdrawals to Neteller will not be processed without us having received this necessary documentation. "


So if i understamd this correct, they say they I cannot use credit back to CC but have to use netteller instead. Fine.

But since i can't use credit card anymore, they want a photocopy and personal ID of it to go with it or else they aint giving me my money???????

Does this sound right?

Sounds a bit unethical to me, unless there is some valid security reason behind this