The KYC (know your customer) guidelines are frequently considered in gambling business news articles on many websites.
It is one of those topics, which inspire fear in operators as they need to deal with KYC compliance every day. In this article, you will find complete information of what know your customer is, why so much attention is paid to it, and what gambling companies should know about it to avoid problems.
KYC – who, what, were?
What is a KYC check? The know your customer, or, simply, KYC procedure is the process of verification of a casino customer’s identity in terms of the financial and personal details. KYC specialists check this information at online casinos to make sure that players’ money isn’t connected with something illegal.
Online casinos are obliged to check their clients’ identity, age, place of residence, and users also should provide and confirm information about where their money has come from. This may include the following documents for the know your customer check:
- bank balance;
- shareholder dividend statement;
- inheritance documents;
- payslips;
- documents evidencing rental income;
- and others.
It is worth mentioning that this procedure is important not only for gambling businesses but for customers as well because it protects them. At the same time, the provision of such personal details is likely to be a negative and inconvenient procedure for online casino customers, rather than something good. However, players should understand that a gambling website’s compliance with these guidelines proves that it is a reliable service provider, which operates based on the law and is fair and honest with its customers.
Why do casinos need KYC?
The major purpose of KYC is the prevention of financial crime as well as problem gambling and gambling by minors. In terms of financial crime, this procedure allows detecting the following illegal activities:
- money laundering;
- fraudulent actions;
- bribery;
- corruption;
- terrorism financing;
- etc.
As a gambling services provider is a legal entity, it has to comply with such regulations like other businesses from other industries. Moreover, the KYC procedure is required for companies of any size.
Speaking about the gambling vertical, online casinos, in particular, KYC is of high importance because, very often, this industry is used for money laundering. The procedure is simple: a user creates a new account on a gambling website, replenishes the balance with money, and withdraws them, using a wide variety of payment methods. Moreover, those involved in such machinations can use Bitcoin and Ethereum, or other cryptocurrencies, which allow getting payouts anonymously. There is also a second variant when a player bets with a certain sum of money and cooperates with another game participant. His opponent loses, and he wins all the money, becoming its legal owner. The third scheme implies money transfer between two accounts. In this case, everything is even simple: one holder of a gambling account transfers money to the balance of another holder.
It isn’t a big surprise that the gambling industry is so attractive for financial criminals. It has many opportunities for anonymous transactions. KYC checks, however, can detect and prevent such cases.
It may seem that the problem is more related to a customer who has infringed the law, not to a company. However, the fact is that a company will also be punished for not being compliant with these guidelines. Regulatory bodies can start with warnings and continue with revoking a license. In addition to this, the operator’s reputation will be damaged.
Regulatory aspects of the KYC procedure
You can find much information about KYC in various jurisdictions on the gambling online magazine Login Casino. Different countries have different AML and KYC requirements for companies as well as penalties. Let’s consider some European countries in more detail.
KYC in Great Britain
The first fact about KYC in the UK is that this country has the strictest rules. All in all, Great Britain is one of those countries, which want to have everything under tight control. That is why operators that provide services there should be exclusively attentive to its KYC requirements.
KYC is a part of the AML program, which also has high standards in Great Britain. They have been developed based on the Proceeds of Crime Act. Regulatory statute consists of the Gambling Act and the AMLD (European anti-money laundering directives). Operators that have failed to comply with the anti-money laundering requirements pay really huge sums (millions of pounds) to the state coffers.
KYC in Sweden
The Swedish Gaming Authority has recently fined one of the operators for not being compliant with AML regulations. The casino brand had to pay more than three million dollars because it didn’t follow the anti-money laundering requirements. Spelinspektionen has accused the gambling company of not paying much attention to the procedures, which help to assess the risks connected with problem gambling and financing of terrorism. The regulator assumed that the casino could have some illegitimate money. In addition to this, it didn’t conduct any checks concerning players who deposited more than $1 500.
It isn’t the first case when the Swedish regulator detects and punishes operators for being non-compliant with the financial requirements. In 2021, it also made a Maltese gambling company revamp its know your customer procedures. The reason for this was Spelinspektionen’s doubt that the operator really knew its customers’ location. In 2020, the Swedish gambling watchdog also demanded the reconsideration of the know your customer checks from another company.
KYC in the Netherlands
Although the Dutch iGaming market will be launched in October, the country’s gambling regulator has already outlined the major requirements for AML and KYC. The KSA has emphasized that these guidelines are important for both players and services providers.
Initially, the KYC guidelines were applied only to the land-based sector, but with the adoption of the Remote Gambling Act and the opening of the regulated online market, the regulator extended them to web-based casinos as well. Now online casinos will know what the KYC checks are.
Operators need to comply with a wide range of requirements, however, the main one is to conduct players’ verifications. In other words, to gather information about their identities. The Dutch regulator is sure that this is necessary not only for controlling customers’ financial transactions but also for the opportunity for an operator to protect players when they have signs of gambling addiction. One of the requirements is the termination of providing services to a client if it is impossible to identify him or her.
Tips for effortless KYC compliance
KYC for a casino is important, we have discussed why above. However, companies often face problems connected with its procedures. Here are some tips that will help operators not to get lost in regulations and develop the know your customer framework in the right way.
What does KYC stand for? It obligates an online casino to understand who its customer is, from the financial point of view. To comply with this requirement, a company should develop a detailed scenario for this procedure.
The next step is thorough customer identification. This can be carried out via common identity documents. The CIP, or Customer Identification Program, is the major step, which helps to make sure that a casino client is a person of who he or she claims to be. This includes customer due diligence (CDD), which is the process of providing identity proofs by a player.
The modern gambling and IT industries are full of solutions, which simplify every stage of KYC. It won’t take long to find a provider of such services.
Final words
KYC in gambling is an integral part of the operation of a company. Paying more attention to customer identity verification, operators can not only avoid fines and money laundering inquiries but also protect their clients from reckless gambling, which leads to unaffordable financial losses and problems with mental health.
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