KYC verification at online casinos

Know Your Customer and Online Gambling: What Is KYC?

Staff Writer Editorials 815

KYC, or Know Your Customer, is a regulatory process that requires companies to verify and confirm the identity of their customers. In the world of online gambling, this means that casinos require their players to undergo KYC verification before withdrawing any money.

If you are wondering about KYC and AML (anti-money laundering) regulations or just want to learn more about how to stay safe at online casinos, read the rest of our guide. We will dive deep into the topic of KYC verification in gambling, show you what it looks like for players, and give you a few tips on how to protect yourself from rogue casinos and scammers.

The Need for KYC & AML

The rapid expansion of the gambling industry is a sign to most players that casinos and sportsbooks are taking in more and more money. And it’s true – the industry is growing at a rate of 11.34% per year, and is predicted to exceed $100 billion in total value in the next 5 years.

On the other hand, experienced players are aware that with this growth comes greater risks – including the risks of money laundering, cyberattacks and similar threats.

Know Your Customer (KYC) and Anti-Money Laundering (AML) are more than just ‘mandatory procedures’ that casinos implement to annoy players. In fact, KYC and AML have a similar goal – to protect players and casinos and prevent crime and abuse.

What does KYC mean?

KYC stands for Know Your Customer and is pretty self-explanatory. Casinos (and all other financial institutions) must establish and verify the identity of their customers before proceeding with any financial transaction. Online casinos are considered financial institutions worldwide, and so you will find that KYC and AML exist in almost every gambling market (which is regulated by law).

In casinos, this verification can take place either at the time of registration, at the time of the first withdrawal, or somewhere in between. However, it depends on the casino when you receive a request from the casino to provide KYC verification documents for the authentication process. Honestly, it doesn’t matter when this moment comes, because one thing is for sure – you will have to go through this process if you want to withdraw money and continue playing.

Three Main Components of KYC

The KYC (Know Your Customers) process includes three main components or requirements that financial institutions – in our case casinos – must meet.

The three main components are:

  • Customer Identification Program (CIP)
  • Customer Due Diligence (CDD)
  • Continuous Monitoring

All three together serve the same goal, which is to cover a segment of the gambling process so that the casino can ensure both your safety and the safety of its customers. And each segment is crucial, because there is no real coverage of the industry if the casino does not establish airtight rules in at least one of the segments.

The first part, CIP, is essentially a program to verify players’ identities. The main purpose of this program is to determine that you are definitely the person you claim to be.

Customer Due Diligence, or CDD, refers to several requirements that casinos must meet in order to determine customer risk. In other words, classifying players into risk groups helps narrow down the volume and identify potentially fraudulent behaviour more easily and quickly.

Finally, casinos also need to continuously monitor their customers’ betting activities, deposits and withdrawals. This way, they can respond more quickly if they detect an unusually large transfer in/out of the casino, and potentially prevent money laundering or another form of fraud.

Customer Identification Program (CIP)

The customer identification program ensures the identity of the customer. The sole aim of the project is to determine if the player is who he claims to be.

For this purpose, the casino asks the customer to present various documents. The so-called KYC documents may vary from casino to casino and from market to market (depending on the KYC regulations). However, the most common and usually mandatory documents are presented as proof:

  • First and last name
  • Date of birth
  • Address or residence
  • Identification number (ID)

Casinos also reserve the right to add other documents or even ask for a personal photo of the customer to establish identity. It all depends on the casino you sign up with and the market you play in.

Customer Due Diligence

In the U.S., FinCEN imposes various requirements on financial institutions as part of the Customer Due Diligence. Customer due diligence is essentially there to determine the level of customer risk, i.e., how likely is it that the player will commit fraud, embezzle funds, etc.

Should the casino classify a customer as a higher security risk, the player will most likely have to undergo extensive additional verification before a withdrawal can be made.

Risk profiling, monitoring of activities and transactions, and verification of the player’s identity are all important parts of CDD. Just as there are three different levels of risk, there are also different methods of dealing with Customer Due Diligence.

CDD Risk Levels

The simplest form of due diligence is reserved for low-risk players. SDD or Simplified Due Diligence is the term that refers to this level of risk. The casino does not consider the player a security risk because their spending and betting habits do not go beyond the normal range.

Basic Due Diligence or BDD is the basis for due diligence in online casinos and most casino websites licensed by authorities use it. In this risk group, the casino collects data and makes projections to determine if the player could cause a problem by committing fraud/money laundering.

Finally, the third and highest risk group is the Enhanced Due Diligence version. EDD is applied to players who belong to the high-risk group, i.e., who are highly likely to return to fraudulent behaviour. For such players, the site may use enhanced auditing routines, more checks, etc. Some casinos do not allow risky players into the casino in the first place.

Continuous Monitoring

Finally, the last element of the KYC process that runs continuously: continuous monitoring. Continuous monitoring involves monitoring gaming activity, such as players’ money transactions, over an extended period of time. The casino does this in order to detect fraudulent behaviour more easily. Moreover, any sudden change or increase/decrease could raise suspicion, and therefore it is important to act quickly in such cases.

Larger withdrawals may result in the casino asking the player to go through the KYC check again. If there are enough suspicions, the player may even have to go through the Source of Wealth process. All of this is done in an effort to detect and prevent money laundering, which has been a major factor in the gambling industry for decades. Nowadays, the situation is not as bad as it used to be, especially in the years before KYC protocols.

Why Casinos Comply with KYC

The KYC protocols are not exactly breezy and require players to provide a lot of personal information. The bigger the roll, the more documents the casino may require from the player, and additional documents further lengthen the process.

So why do casinos do this? Why do they have to comply with AML and KYC regulations?

Quite simply, they have to. It’s all part of responsible gaming initiatives. Here are the three main reasons why online casino operators comply with the strict rules and guidelines for KYC/AML regulations.

KYC Protects the Players by Preventing Identity Theft

The first and most important reason why websites follow KYC is to protect players. KYC, or Know Your Customer, is designed to help casinos protect their customers by preventing identity theft.

Think of it this way: If someone logs into an account claiming to be you, you would expect the casino to have protocols in place to detect such behaviour and prevent the player from logging in, right? That’s exactly what KYC is for, actually. You get top-notch protection as the financial institutions or casinos thoroughly verify your identity before allowing you to sign up and wager money in the premises.

KYC/AML Prevent Fraudulent Behaviour and Money Laundering

The other reason is that casinos want to prevent the spread of crime, especially money laundering. In the 1970s and 1980s, before KYC/AML regulations were introduced, casinos were fertile ground for money laundering and other types of fraud. Strong initiatives, strict laws, and no room for negotiation have helped solve the problem somewhat, but we are still far from eliminating money laundering for good.

That’s why every single casino that operates with a license must follow KYC and AML regulations. By submitting and verifying all personal information, casinos ensure that accounts are not created anonymously or by fraudster profiles looking to launder money or commit other fraud crimes.

They Must if They Want to Retain Their Licences

The third reason is that casinos decide to comply with KYC rules and require their players to get verified if they want to keep their gambling licenses. Simply put, gambling authorities do not want to take any more risks and have made it clear to casinos that if they want to keep their licenses and be subject to regulation, they must comply with the rules.

For most operators, licences are a given, and so many have pledged to support any initiative to protect players and casinos. And if a site refuses to comply with KYC regulations, ask yourself: – is this really the kind of casino I should be playing at? Because a casino that doesn’t care about these things is not exactly a reliable casino, if you ask us.

What Are KYC Documents?

Before we conclude, let us take a look at the documents you need to submit to the KYC. Below is the full list of documents that the casino may ask for depending on your risk level.

  • Passport
  • Driving licence
  • Birth certificate
  • Proof of address
  • SSN cards/citizen cards
  • Bank statements
  • Financial references
  • Utility bills

Please note that it is up to the casino what type of documents they request. So, don‘t prepare documents in advance because you do not know what exactly you will need. However, you can check the casino’s terms and conditions page to find out.

Also note that some sites ask for photos of players holding their personal documents such as passports, ID cards, etc. This is an attempt to further strengthen the KYC process.

Finally, we must point out that there are two KYC processes – one where you submit the documents in physical form and the other where the documents are digitised. Paper-based KYC or in-person KYC is not as popular in online casinos as sites rely more on eKYC.

Conclusion

As you can see, KYC is quite straightforward. Know Your Customer and anti-money laundering initiatives and regulations are there to protect everyone in the industry – players and casinos alike!

If you have any further questions or would simply like to find out more about the KYC/AML regulations, please feel free to contact our team. In the meantime, you can check out our other guides and manuals for gambling and gaming online here. Stay tuned for more guides and updates from the industry.

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BestCasinos team consists of online casino experts dedicated to spreading their knowledge and experience to a wider audience, all in effort to help even the most inexperienced players gain their footing in this exciting industry.

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