Know Your Customer (KYC) Guide

What is KYC?

KYC, or Know Your Customer, refers to regulatory guidelines for the security of financial institutions and other corporations from economic crime. Such guidelines involve identifying and verifying a prospective customer’s identity, establishing a customer risk profile, or CDD (Customer Due Diligence), and frequently monitoring a customer’s financial transactions, referred to as EDD (Enhanced Due Diligence).

KYC policies are typically enforced in line with the overarching AML (Anti-Money Laundering) regulations. To ensure compliance with AML regulations, financial institutions and other industries dealing with monetary transactions, like crypto platforms, online casinos, and gambling applications, are required to implement KYC policies. Although KYC processes are regularly enforced as a part of AML regulations, there are particular scenarios where KYC can also be applied independently.

Why Do Online Gambling Platforms Require KYC?

Besides mitigating high-level crimes like money laundering, iGaming operators mainly ask their customers to complete KYC processes to keep fraud at bay. Bad actors creating multiple accounts under false identities are among the most severe challenges behind such illegal activity on online gambling platforms.

Bad actors create fake accounts and use them to deliberately lose along with their other accounts, ultimately giving an edge to their main accounts. Certain users also abuse bonuses offered by gambling platforms via their multiple accounts and repeatedly try to claim sign-up bonuses by creating new fake accounts. Ultimately, KYC processes are executed to dissuade these fraudsters from exploiting such bonuses.

Moreover, some bad actors use stolen banking cards to sign up with gambling platforms and deposit funds to their user accounts. Such users may take advantage of their bank and chargeback policies, also called “friendly fraud.” Con artists go after refunds, leading to monetary losses for the gambling platforms they sign up with. Consequently, gambling sites accepting credit card payments execute stringent KYC procedures to safeguard their own finances and mitigate such unlawful activities.

The gaming industry also requires completing KYC verification processes to keep underage individuals from accessing gambling services deemed illegal for their ages. The lawful age to gamble differs from country to country:

• The United Kingdom: Players who are at least 18 years old can gain access to and play in online casino platforms and other gambling establishments. The UK Gambling Commission regulates all gambling operations in the UK, and licensed casinos are required to keep minors from participating in any gambling activity.
• The United States: Due to state-regulated laws, the appropriate age for legally accessing gambling platforms in the US can vary in each state. Although most gambling websites in the US only allow players who are 21 or older, there are also states where a player must be at least 18 to access an online gambling platform and use its services legally.

To comply with their respective laws, online gambling operators must be vigilant when performing age verification processes. Providing identification documents to gambling platforms can help determine whether a user is a minor. To ensure compliance with security measures and regulations, operators may authorise the legitimacy of an individual’s ID and age eligibility by relying on third-party KYC providers or cross-checking their names against the electoral rolls.

The KYC Procedure in Online Gambling

When new players sign up with an online casino platform, they are usually required to verify their account. While the KYC process may seem simple–requiring users to upload certain documents to verify their accounts–the process consists of a set of components at work behind the scenes. Below are the main components of a KYC procedure and how they function:

Component 1: CIP (Customer Identification Program)

The first part of the KYC process is the CIP program, or the Customer Identification Program, forming the first line of defence. In this step, the platform asks for specific documents from the user, prompting them to identify themselves and verify who they say they are.

The two main documents the platform may require from the new user typically include:

• Proof of identity documents
• Proof of address documents

When asking a customer for their proof of identity, the platform may request that they provide copies of documents such as their government-issued ID card, driver’s license, or passport.

The proof of address documents a casino requires from users are often approved as bank statements (preferably less than three months old during submission) or a utility bill in their name. In certain scenarios, the online gambling platform may also approve a letter from a civil servant addressed to the user and sent to their residential address.

Sometimes, the gambling platform may also ask the user for an SoF (Source of Funds) for their identity verification. In this step, the user must provide a financial statement document. Such a document will clarify for the gambling platform that the money the user is gambling with is legitimate and their own. It also guarantees that the user is careful to practice online gambling safety and stays within their means.

Component 2: CDD (Customer Due Diligence)

The next part of the KYC procedure in online gambling platforms is CDD or Customer Due Diligence. As a matter of fact, all financial institutions are mandated to conduct this process. In this step, financial institutions and gambling platforms must carry out thorough risk assessments of customers as well as their monetary translations. After this step is through, the gambling platform then appoints a risk rating to each of its users. Such rating lays out how often the online gambling platform will observe the customer’s account.

Regarding KYC in gambling, users are normally exposed to three types of due diligence checks. An online gambling platform may implement one or multiple of these for each customer:

• SDD or Simplified Due Diligence
• CDD or Customer Due Diligence
• EDD or Enhanced Due Diligence

Simplified Due Diligence

An online gambling platform automatically conducts Simplified Due Diligence procedures on every new user opening an account with it and making a deposit. This certain check is customary for user accounts considered to have an average to low value where the chances of fraud, financial crimes, terrorism funding, and money laundering are minimal. Usually, users who have registered, deposited money, and claimed casino promotions have this type of check applied to them.

Customer Due Diligence

When a user reaches a certain number of deposits or cashouts, the gambling platform carries out a Customer Due Diligence check. This check requires the gambling platform to carry out identity verification and confirm that the user is who they say they are. The platform may also require copies of the user’s identification documents during this step.

After obtaining the required information from the user, the gambling platform will then conduct another risk assessment. The user’s account is then blocked and remains that way until they provide the platform with the required documents. Simply put, the user cannot deposit or withdraw funds or even opt into bonus promotions during that period.

Enhanced Due Diligence

Users that online gambling platforms consider high-risk individuals or those with high net worths are usually exposed to Enhanced Due Diligence. For instance, if a user is identified as a PEP (Politically Exposed Person), meaning someone who works in finance or at a brokerage or is associated with establishments with significant cash flow, they can also anticipate undergoing an EDD. This is mainly due to the higher risk of fraud and money laundering instances associated with such professions.

High-roller or VIP players made prominent due to their excessive wagers can also expect to be subject to an EDD procedure. In this process, the gambling platform will prompt the user to provide their SoF documents or financial records to guarantee that the money they use to gamble is from a legitimate source and their own. Such assessments also check whether a player poses any risk and that they practice responsible gambling.

Component 3: Ongoing or Continuous Monitoring

This final step counts as the most crucial part of the KYC process. Ongoing or continuous monitoring is the continued evaluation of a customer’s behaviour and transactions to guarantee they align with their risk profile. This process is designed to mitigate future risk. Online gambling platforms can flag suspicious transactions or activity immediately by closely monitoring user accounts. During such operations, SARs (Suspicious Activities Reports) are sent over from the gambling platform to the authorities such as FATF (Financial Action Task Force), who then closely assess such reports.

Keep in mind that KYC processes are not one-time procedures. Rather than happening only once and never again, they can be activated by many factors, some of which include the following:

• Updated user account details, such as a new phone number or a different address
• Change in occupation, such as a new job in finance or the political sector
• Suspicious transactions or account activities, such as multiple deposits or withdrawals made in quick succession
• Changes in user behaviour, such as excessive gambling, numerous withdrawal attempts, or a sudden substantial deposit

How to Speed Up the KYC Process

To speed up the Know Your Customer (KYC) process at online casinos, take the following into consideration:

1. Before you begin the KYC process, have your documents prepared in advance: ensure you have clear and up-to-date copies of the necessary documents such as identification, proof of address, and any other required information.
2. Confirm that the information provided is accurate and matches the details on the documents provided.
3. Read and carefully follow the KYC instructions laid out by the casino, ensuring you submit the requested documents and information requested.
4. Make sure the submitted documents are legible and clear. If they are not, the process will be delayed.
5. Play at reputable casinos with a strong reputation and a track record of efficient KYC processes.
6. Don’t hesitate to contact customer support, they can provide help and any necessary instructions.
7. Be patient as KYC processes can take time, especially during peak periods. Allow enough time for the casino to complete their procedures.
8. Check for updates on your KYC status by keeping an eye on your email or account notifications, as sometimes the casino might request additional information or require clarifications.
9. When a casino asks for further details or clarifications, follow up as soon as possible to help avoid unnecessary delays.
10. If any problems or delays arise, maintain a clear and respectful line of communication with the customer support team so they can help resolve any issues.

Remember that the KYC process is in place to ensure security, prevent fraud, and maintain the integrity of financial transactions. By being prepared and collaborative, you help speed up and streamline the verification process.

The Benefits of KYC Procedures

KYC policies have numerous benefits for both gamblers and online gambling platforms. Below are the most prominent benefits of KYC in gambling:

Mitigates Fraud and Other Crimes

One of the most essential advantages of KYC processes for online gambling operators is that they mitigate crimes like money laundering and fraud. By authorizing the identities of customers, operators can guarantee that they are, in fact, not facilitating unlawful activities. This is largely important in the gambling industry, considering it is known to be the target of criminals and fraudsters.

Verifies Gambler Age for Legal Compliance

KYC helps operators ascertain that their customers are of legal age to access their services. This is particularly crucial in jurisdictions with stringent age limits for gambling. By verifying their customers ‘ ages, operators can save themselves from potential financial and legal penalties for enabling underage individuals to partake in gambling activities.

Protects Reputations

Executing KYC procedures can help gambling companies safeguard themselves from reputational damage and bad publicity. By committing to responsible gambling and compliance, operators can also earn the trust of customers and regulators alike. This ultimately results in increased customer loyalty and overall revenue for the business.

Helps Detect Problem Gamblers

Apart from guaranteeing compliance with age-related regulations and mitigating fraud, KYC practices allow operators to weed out problem gamblers. By closely monitoring the gambling activities of users and analysing their spending habits via EDD, operators can effectively identify potential problem gamblers. This allows for early intervention and support to be offered to those who need it most.

In Conclusion

Ultimately, KYC procedures play a significant role in reducing the possible risks linked with online gambling. Once again, by executing a proper KYC policy in tandem with modern technology, operators can effectively authorise the identities of their customers, ascertain their risk levels, and track their gambling activities to impede fraud, money laundering, and other criminal offences.

If operators fail to comply with KYC regulations, they may face irrecoverable reputational damage and legal repercussions like significant fines. Thus, companies in the gambling industry must prioritise KYC processes and frequently review and modify their processes to guarantee they remain up-to-date in the face of unforeseen risks and evolving regulations. At the same time, for their own good, it is just as crucial for customers to comply with KYC completion requests on the gambling platforms they sign up with.