Financial institutions, including casinos, have always relied on identity verification to keep customers safe. KYC procedures are the most recent innovation in customer safety. Gambling is particularly vulnerable to fraud, money laundering and theft, making KYC even more crucial.
The question now is, “How exactly does KYC protect gamblers?” This Know Your Customer (KYC) Guide[1] answers this, looking into the numerous ways this identity verification system protects iGamers. Let’s get started.
What is KYC?
KYC, short for “Know Your Customer,” is a set of regulations put in place for two major reasons. One is to protect financial institutions like cryptocurrency apps, e-wallets, or gambling platforms. So, this process aims to evaluate the potential risks that could arise by associating with customers before entering into a business relationship with them.
Secondly, it also confirms people’s identities making use of said financial platforms. By doing so, the KYC procedure thus helps prevent identity theft, money laundering, fraud, and other illegal activities.
Understanding KYC in Relation to Gambling
Look at it this way: the gambling industry deals with monetary transactions daily. So, of course, it’s a no-brainer that these sites will be the primary targets for financial crimes[2]. How do we know this? Several reports of money laundering, cyber theft, information theft, etc., are out there. Large prizes are particularly attractive to fraudsters and criminals.
So then, how can gambling operators promote maximum security so players can have a great experience? That’s where safety protocols like KYC verification come in to ensure consumers are safe from these attacks. They are put in place to confirm that only legal gambling accounts are allowed to operate, without the risk of any of the financial crimes mentioned earlier.
Moreover, in gambling, KYC procedures work hand-in-hand with Anti-Money Laundering (AML) regulations. These protocols involve the identification and verification of a user’s identity as well as the continuous monitoring of their transactions. Therefore, these KYC checks protect the player and the gaming company from hackers and fraudulent actors.
KYC Compliance
The UK Gambling Commission (UKGC) enforces strict identity verification rules for gambling operators. You may ask “How?” That’s easy.
On the one hand, the commission requires operators to do their Enhanced Due Diligence (EDD)[3]. This has to do with monitoring customer transactions and detecting suspicious activity. Doing so allows them to detect any unusual patterns, in which case, they have to submit suspicious activity reports (SARs)[4] to the National Crime Agency.
But beyond that, KYC regulations in the UK also focus on identity, age, and source of funds verification, known as Customer Due Diligence (CDD). All of this is to ensure customers’ funds are legitimate and promote responsible gambling.
Importance of KYC in Protecting Gamblers
For the purpose of this guide, let’s focus on KYC procedures and how they protect gamblers. Below are the common ways iGamers enjoy protection via the verification process:
For Detecting Illicit Gaming Sites
Gambling platforms operate only by complying with various regulations related to consumer rights, data protection, and anti-money laundering. Failure to operate by these regulations can result in heavy penalties or a loss of licence in some extreme cases. This way, it’s easy for patrons to identify illegitimate gambling operators because only legitimate platforms are licensed by the law and must comply with these regulations.
To Prevent Fraud and Cyber Threats
Another way the KYC process protects gamblers is by reducing the risk of fraud and cyber threats. With these measures, gaming hubs can verify player identities and monitor their transactions. By doing so, it becomes easy to detect any suspicious patterns that may indicate unauthorised access.
Promoting Responsible Gambling
Lastly, let’s take a look at responsible gaming in relation to the KYC verification process. Besides confirming customers’ identities, this system also implements age verification protocols to confirm players’ ages. Of course, this helps prevent underage users from accessing gambling services.
Technologies Used for Know Your Customer Procedures
Seeing how important the verification system is, the gambling industry uses several technologies to implement these procedures efficiently and securely. Here are some of the different technologies used:
- Document Verification Software: This is one of the core technologies in the industry. Gambling service providers use this to verify the authenticity of government-issued IDs by analysing watermarks, barcodes, and other security features.
- Biometric Authentication: Biometric scans are gradually becoming more popular for secure and accurate identity confirmation. Resources like facial, fingerprint, or voice recognition are used to authenticate the user as the true account holder.
- Multi-Factor Authentication (MFA): MFAs add an extra layer of security to KYC procedures. As the name suggests, it combines multiple authentication methods to confirm the player’s identity. So, in addition to your password or surname, you may need to enter a one-time code sent to your phone or you can use biometric authentication[5].
Others may include Optical Character Recognition (OCR), Electronic KYC (eKYC) Solutions, etc.
Process of KYC Verification at Online Gambling Platforms: The Requirements
The identity verification requirements in the iGaming industry mandatesdata collection, made up of some key components:
User Identity
Verifying a user’s identity isn’t merely about a simple face scan. Rather, it involves gathering all of their personal data—submitted willfully, of course—such as their name, date of birth, or address. Usually, gaming hubs request that users provide a scanned copy of their government-issued ID, like a driver’s licence or a passport.
Sure, in some cases, the platform may require the user to take a selfie, but only after providing their ID. The sole aim of doing so is to cross-check the document to make sure it’s the owner of the account truly opening the account.
Source of Funds
“How did you get the money used to fund your account?” If you’re unwilling to answer this question truthfully and provide documents to prove it, you should consider an alternative source of entertainment. The UKGC requires that online gambling operators verify their customer’s source of funds to prevent illicit activity and problem gambling.
Generally, patrons can provide income statements, pay stubs, and other valid documents that prove their source of income. Betting sites then scrutinise these documents to detect any irregularities that may be a sign of laundering.
Age and Address Verification
The phrase “Age is just a number” may apply in other establishments but definitely not at casinos or bookmaker sites. When it comes to betting, age determines if the player will be able to continue playing and withdraw earnings or not. As a result, users may need to provide documentation proving they meet the minimum gambling age requirements.
Besides that, gaming regulations also require proof of address documentation. This could either be a:
- recent utility bill,
- credit card statement, or
- bank statement.
Don’t worry. It’s just to confirm that the user, you, is physically present within a region where online gambling is legal; nothing else.
Ongoing Monitoring
If you thought it ended with your proof of address submission, sorry to prove you wrong. Even after verifying your identity, the KYC process doesn’t end. Regulatory bodies require online gambling platforms to keep monitoring transactions and report any suspicious activity. This generally involves looking for patterns that may signify money laundering, such as unusually large deposits, frequent withdrawals, etc. So, gamblers who thought they were already in the clear should rethink it.
Challenges of Know Your Customer (KYC) in iGaming
More often than not, the seeming challenges of the KYC process are from the view of users. This is because the procedure can be time-consuming, which is no one’s fault, to be honest. But because gamblers wish to access their favourite games as soon as possible, verifying identities can seem like an unnecessary hassle.
As such, gaming operators face the challenge of striking the perfect balance between protecting user interest and improving customer experience. Of course, they can’t afford an either/or situation, so these two have to go hand-in-hand. So, to meet players’ expectations and combat this issue, KYC checks must be optimised to verify players and their ID documents as quickly as possible.
Frequently Asked Questions About KYCs
Here are direct answers to some questions you may still have about the KYC process:
What are the acceptable documents users can submit for verification?
Generally, customers can submit any government-issued ID, including passport, driver’s licence, national ID card, etc. For proof of address, you will need a utility bill or a bank statement; for proof of funds, previous salary slips or tax returns are sufficient, while a selfie is all you need for facial recognition.
Was there ever a need for KYCs in land-based casinos?
Of course, yes. KYC procedures have been used in brick-and-mortar casinos to confirm patrons’ identities, although the process wasn’t always as strict as it is today. In those establishments, only VIP players and high rollers were subject to more rigorous and thorough checks.
How long does the verification process take, on average?
The duration of the process may vary depending on the betting site and the information provided. But usually, it takes between a few minutes to 3-5 business days; note that complex cases may cause delays.
Is it possible to keep gambling online without completing KYC procedures?
No, it is generally not possible. Most licensed online gaming operators require their customers to complete the verification process before making deposits, placing bets, or withdrawing funds. Sometimes, gamblers may be allowed to sign up and play on select sites, but don’t be deceived; withdrawals are usually blocked until KYC verification is completed.
Does KYC verification really prevent fraud on gamblers’ accounts?
Definitely yes. Know Your Customer procedures are very effective in preventing fraud. You may not know (why should you?), but verifying identities helps prevent identity theft, unauthorised account access, block fraudulent acts, and ensure funds are from legitimate sources.
Wrap Up
KYC verification may be time-consuming, but it’ll help keep your identity and winnings safe. Who doesn’t want to be assured they enjoy maximum safety and security while gambling? Not me, not you! So, whenever you feel KYC procedures are unnecessary, remember they are solely for your protection. Enjoy!
Citations
1 “Know Your Customer (KYC) Guide,” written and published by newcasinos.com
2 “Different Types of Financial Crime,” written by FCA, published by Financial Crime Academy LLC
3 “Enhanced due diligence: What is EDD in banking?,” written by Tom Sullivan, published by Plaid Inc.
