What Is KYC & How Does It Work?

The KYC Process Explained

Casinos use the KYC process to identify customers to ensure their IDs are legitimate, and identify any risk factors associated with them, especially when it comes to players’ source of wealth.

KYC is an obligatory requirement for most financial institutions such as banks, credit unions, wealth management organizations, broker-dealers, and fintech apps. However, with the rise of online gambling and the increasing number of online gamblers, it has become incumbent for casinos to adopt the process too.

It may come as tedious but bear in mind that by complying as a player and customer, you are helping to prevent underage gambling, money laundering, and fraud. 

If you fail to comply, you may be denied services such as opening a player account, making deposits or withdrawals, or participating in certain games.

Why is it important?

Online fraud and money laundering are rife in the world of Worldwide Web and online gambling is no exception. Financial regulators need to combat this crime head-on. 

Thus, while not all gambling sites or casinos have implemented the obligatory KYC procedures, those that have been verified and licensed by established Maltese and UK regulators must request their players to go through a KYC process.

In iGaming, KYC helps operators not only identify, but also verify, the customers who sign up to their websites online as well as via mobile. 

But what is its purpose? Its main intents are the following:

• The exclusion of underage gamblers
• The prevention of gambling addicts who have excluded themselves from playing
•  Avoiding financial fraud including credit card and cashback fund
• The deterrence of the same user creating multiple accounts
• The supervision of any suspicious activity
• Highlighting users who may be deemed as possibly risky. 

What You Need to Know About KYC

There are three components to KYC that every player should know about.

These are:

Casinos and the KYC Process

Here is a step-by-step guide to complying with a basic KYC process: 

1. Proof of Identity:  This is either a copy of your passport or driver’s license or any other government-issued identification document depending on your country of residence. All documents must have a photo. It’s incredibly important that for the proof of identification to go smoothly and as quickly as possible, the entire document is visible.
2. Proof of Address: This could be either a copy of a bank statement or a utility bill in your name that is not dated longer than three months from the KYC request. Letters from a public authority addressed to you and sent to your home address are usually also accepted.
3. Proof of Payment: Most casinos offer credit/debit cards, Neteller/Skrill, and bank account deposit methods. You need to verify your payment method used for deposits at online casinos. Casinos might also request to see a bank statement or screenshot from your online banking account bearing your name and account details. 

Just like a bank, the casino may request a financial statement called ‘ Source of Funds’ or ‘Source of Wealth’ to make sure you are playing with money that pertains to you and that you’re not punching above your means.

Expert Advice

Rosie Bond

Expert Tip – Ensure the KYC process is carried out with a verified casino!

Hey there!  The request for information for the KYC process often takes place when you add a payment method and request a withdrawal. Unregulated casinos might withhold a player’s winnings with the excuse they haven’t provided  ID to verify their identities. 

However, this is AGAINST the rules! Always make sure you register and play with a verified and licensed casino.

What You Should Never Do During a KYC Process!

Here is a list of pointers to watch out for and DON’Ts to follow when undergoing a KYC Process: 

• When presenting your Proof of Identity, do not cover any information or manipulate the picture or scan. The entire document needs to be visible!
• Ensure that the document is valid and has not expired.
• When verifying your credit or debit card, show the first six and last four digits of your card number, your name and expiry date BUT cover the middle digits and any other digits that the casino has not requested to see.
• When presenting the Proof of Address, make sure that the utility bill/ bank statement/ official document is not older than three months from the time of the request of the casino.
• Make sure that the KYC process takes place before you have even made a deposit. ALL ID verifications need to take place before you have started gambling. 
• Always make sure that the casino you are playing with is licensed and regulated by either the UKGC or the MGA. Unverified casinos may ask you to provide ID verification before you cash out your winnings as an excuse to hold on to your winnings.

What does a casino reject during a KYC Process?

During a KYC process, you provide the casino with various information, which is then used to assess whether you meet the criteria based on low to no financial risk set by the casino’s compliance team.

If you as a customer do not meet the criteria established by the business or if the information provided is found to be false or inaccurate, the KYC process may result in rejection.

For example, a casino may reject your application for a loyalty program or for opening a gaming account if you:

• don’t provide sufficient identification don’t provide the right identification documents as requested by the casino
• engage in gambling or high-risk activities such as money laundering or criminal actions
• provide false or inaccurate information
• provide cards and payment means that are not in your name

The goal of a KYC process is to help businesses comply with regulations and prevent fraud and other illegal activities. Thus, it is important that you as a player provide accurate and truthful information to ensure a smooth and successful KYC process.

The KYC Process and Data Storage

So what do gambling operators do with these documents in order to have them verified? They usually send them to official independent third-party verifiers, who then check the authenticity of the documentation provided. They then run the information against a global database to confirm that the customer is who they claim to be.

Global watchlists are also used to ensure that the customer is not a PEP (Politically Exposed Person)– a person holding a position of political power at a higher risk of corruption. The check also highlights any financial sanctions taken against an individual posing a threat to the casino. That is why the Source of income is also important and needs to be verified.

Third-party verifiers also compare customer data to self-exclusion lists, usually by using GAMSTOP. This prevents problem players from accessing casinos or sportsbooks during their period of voluntary self-exclusion. 

Casinos are however required to protect customer data under various laws and regulations, including the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Casinos usually employ various security measures to protect customer data, such as SSL encryption, access controls, and backup systems.

SSL encryption is the most popular form of casino data storage as it enables encryption from a server to decryption on the other side. It is designed to protect data transfer over the internet preventing hackers and malignant organizations from viewing the contents of the traffic.

Expert Advice

Rosie Bond

Expert Tip – Beware of Casinos that Do Not Ask for your ID Verification!

Listen up! Casinos that are regulated by the UKGC or the MGA will not allow their customers to play for real money unless they complete their KYC verifications. It is unregulated casinos that usually allow you to make deposits and withdrawals without asking for any ID verification whatsoever. 

Here at Aussiecodes, we feature casinos that are safe, regulated, and verified so you can enjoy your time playing with ease of mind!

Legal Requirements: Anti-Money Laundering and Anti-Terrorism

Know Your Customer process and Anti Money Laundering (AML)  process share many similarities. Whilst KYC is a part of the AML process, AML is more of an umbrella term for the various measures and processes a company needs to have in place. 

Here below we are going to highlight how the KYC process helps build a foundation for the implementation of Anti-Money Laundering tools and policies.

Differences between the KYC Process and AML 

Here are the main differences between KYC and AML and how the latter looks at risk assessment at a deeper level than the KYC process.

Eliminating the Financing of Terrorism

Terrorist organizations use gambling websites to launder money and use the winnings for terrorist means. The Financial Intelligence Unit can use the data collected from gambling websites to put a curb on such transactions that may be tied to money laundering activities of terrorist means.

Implementing AML tools

Criminals use casinos to simply exchange their dirty money and cash out their winnings in the form of ‘clean’ money. They can do this by colluding with other players, buying someone else’s chips, abusing gambling accounts, and combining gambling and non-gambling methods through the use of crypto, NFTs, or property purchases.

AML tools that are built on KYC process foundations can help casinos protect themselves from vulnerabilities that include:

• Transactions that are not consistent with the player’s profile
• Depositing multiple amounts of cash and receiving multiple cheques on that account
• Multiple individuals sending money to one beneficiary
• Cheques issued to a gambler’s family member
• Funds transferred to a third-party account
• Transactions on casino accounts handled by other persons other than the account holder
• Use of third parties to handle the structuring of deposits and wire transfers.

AML Measures thus need to include:

• The development of appropriate AML policies
• The adoption of an effective risk-based approach
• The performance of Customer Due Diligence checks
• Carrying out frequent risk assessments
• Reporting suspicious activities.

Conclusion

As annoying as undergoing a KYC process may be, it is there for a reason: to protect casinos from fraudsters and criminal organizations. Do not be alarmed therefore when the casino asks to verify your personal documents.  

The casino needs to ascertain you are who you claim to be! It is natural for gambling firms to be required to go through the same background checks that major financial companies and banks do.