With the global gambling industry going through a major rise, it is no surprise that it is required to comply with the same rules that also apply to big financial institutions and banks. One specific requirement that started to apply to many online casinos and sportsbooks is the mandatory KYC (Know Your Customer) procedure that players and bettors must go through.
While not all gambling markets have implemented obligatory KYC, the UKGC (UK Gambling Commission) has included compulsory KYC procedures in its licence conditions. Any gambling operator that applies for a casino or sportsbook licence from the UK regulators must comply with these conditions and request all of their customers to go through a KYC process.
The KYC process serves as one of the tools that ensure actors in the gambling scene are compliant with local regulations and take all required steps to prevent money laundering and identity fraud incidents.
If you want to know what KYC is and why UK players are required to go through this process when gambling online, you should continue reading. We will cover the basics of this procedure and how it is used to ensure a safer gambling industry not only in the UK but across numerous markets around the globe.
How KYC Procedures Work to Ensure Your Safety
KYC stands for Know Your Customer, and as the name hints, the financial institution or gaming website that is required to follow this procedure will collect a certain type of information about their customers.
Certain virtual casinos or sportsbooks may allow you to register and start playing without going through the KYC process as it may take some time to complete the procedure. However, since the UKGC implemented KYC as one of its licence conditions, gaming and betting operators in the UK will not allow their customers to play for real money before they complete their KYC verifications.
Usually, the type of information that is collected during the KYC process includes personal details like address, email, phone number, and more. Providing the information asked by the casino or the bookie during the KYC verification will not only allow you to play for real money but you will also be able to request a withdrawal once you have earned a sufficient amount of winnings.
Mandatory KYC was implemented by the gambling industry in the UK as a way to prevent underage gambling and protect vulnerable individuals. Upon opening an account, new casino and sportsbook members must complete the KYC process to verify their age and identity. Before the compulsory verification of one’s identity was required, players could sign up with a gaming or betting brand and place wagers before they have confirmed they are of legal age to do such activities.
As it usually takes about 72 hours for the casino or sportsbook to verify their customers’ identities, before KYC was mandatory upon registration, players and bettors were still allowed to place wagers before the gaming or betting brand verifies their identities. That could mean that underage people or high-risk individuals could have been wagering real money until the website took the correct measures to restrict their access.
However, since the latest identity verification conditions imposed by the UKGC, gambling websites operating in the UK are not allowed to let new customers place wagers or enjoy games in fun mode before the casino or sportsbook brand verifies their age and identity.
KYC Requirements Licenced UK Gaming and Betting Operators Must Meet
In 2019, the UKGC introduced a new set of KYC regulations that apply to all operators that have been licenced by the UK regulator. Following the stricter requirements, instead of asking customers to provide proof of ID only at the point of withdrawal requests, operators were required to have their members go through a KYC process before they can make any type of wager on the respective websites.
According to the updated licence conditions of the UKGC, operators have to comply with the following KYC requirements:
- The required customer information must be collected and verified by operators before members of the website are allowed to gamble. The information that players/bettors have to provide must include but is not limited to the names of the customers, their date of birth, and their address.
- Upon requesting a withdrawal, customers should not be asked to provide additional information to confirm their identity. That said, this restriction does not apply to cases when any other type of information that the operator is required to collect due to other legal obligations.
- Before customers are allowed to deposit funds into their accounts, operators must inform them about the type of information required during the KYC process and the circumstances that require such details to be provided.
- Licenced operators must also ensure that the information provided by customers and stored by the company is staying accurate.
There might be other legal circumstances that may allow operators to require additional information from their customers when a withdrawal is requested. However, this exception does not apply to information that could have been obtained at an earlier point before a customer has requested a withdrawal.
Why There Is Need for KYC in Gambling Industry
Statistics show that the number of active internet users has reached 5 billion people as of April 2022. That number represents 63% of the global population, meaning that sectors like online gambling are continuously growing at a rapid pace. With such an increase in online gambling activity, it comes as no surprise that KYC and Anti-Money Laundering practices have become heavily implemented in regulated gambling markets across the world.
While major gambling businesses are required to abide by the restrictions imposed by local authorities, they still need to make the experience for their patrons as enjoyable as possible. However, some players and bettors tend to find the KYC process too burdensome, avoiding websites that require identity verification from the get-go.
While going through the KYC procedure even before you are allowed to play for fun might seem annoying and inconvenient but try to understand that this is a requirement that many licensed operators must follow through, especially if they are licensed by the UKGC.
The main reason why gaming and betting sites are required to implement a mandatory KYC procedure is to prevent money laundering and terrorist funding practices. This is also a common practice implemented in the operation of major banks and other financial institutions as they also need to implement various methods to avoid money laundering and other fraudulent activities.
Without the KYC procedure, gaming and betting sites may be used by criminal organisations to launder money and assimilated funds through illegal activities. The issues that KYC tackles include:
Scams
The use of KYC allows gaming and betting operators to collect enough information about their customers. Details that players and bettors provide during registration, payments, and their overall gaming and betting experience are safely stored by operators. Such details are vital in cases of a legal issue or concerns about a possible scam. Thanks to the information collected through KYC, gambling operators can detect the accounts that may be involved in illegal activities.
AML
Just like financial institutions and banks, gaming and betting sites have become very attractive for criminal organisations which are looking for ways to launder money. There are numerous cases of using funds from illegal activities and laundering them through massive deposits and withdrawals at gambling websites. The KYC procedure, along with other AML tools, can detect suspicious transactions and alarm gambling operators about potentially illegal activities going on at their websites.
Avoiding Terrorism Financing
Terrorist organisations can also use gambling websites to launder money and use the funds for terrorist activities. Data collected thanks to various financial institutions and gambling websites can be used by the Financial Intelligence Unit to stop transactions that may be linked to money laundering activities of terrorist organisations.
How KYC Helps the Gaming Industry
Since virtual casinos and sportsbooks are often handling large sums of money, they are required to go through the same strict procedures that major financial institutions implement. Gambling websites may handle millions of pounds in just a day, which is why they are often targeted as platforms for laundering dirty money. As playing online removes the aspect of in-person interactions, individuals who participate in criminal activities can easily join gambling websites and launder funds.
Thanks to the KYC procedure, gambling operators can identify customers and confirm if their identity is correct. Thanks to this security tool, operators can detect suspicious activities and prevent money laundering transactions. With the data collected through KYC procedures, individuals suspected of conducting illegal activities can be flagged and even banned from making transactions on gaming and betting sites.
Banks, financial institutions, and even gambling sites must assess the risk level correctly to determine the actions they need to take to implement the right AML tools. AML controls are required for the gambling operator to properly assess the risk levels and take precautions against high-risk activities. New customers are exposed to said AML controls when they join a betting or gaming site. When new players or bettors open accounts with gambling companies, they must go through KYC and Due Diligence procedures.
Criminal entities known as dot-cons have become very common in the online gambling sector, with such organisations washing money by losing on games on purpose and then redeeming “clean” winnings. Such criminal groups, as well as other illegal activities, force regulators from around the world to be very strict with licensees about following AML requirements.
Just in the past year, the UKGC took actions against several operators that failed to comply with licence conditions and failed to properly assess high-risk situations that may indicate money-laundering activities.
With the implementation of virtual cards, e-wallets, and cryptocurrencies, micro money-laundering is getting easier. That is why gambling regulators work on imposing even tighter regulations, including mandatory KYC procedures that would help the prevention of money-laundering cases.
Can Players Avoid KYC Checks While Playing Online?
Many casino fans and bettors do not appreciate mandatory KYC checks as they can be very burdensome. What is more, in many cases, players do not feel comfortable sharing so many details with gambling operators as they are concerned about the safety of their sensitive information.
While some virtual casinos and sportsbooks will allow their users to play and place bets before they verify their profiles, after the latest changes in the UK gambling regulations, it is not possible to place any wagers online before you go through a KYC check. Unfortunately, some players and bettors may choose to make their bets at unlicensed gambling sites as they would not require identity verification. However, you should keep in mind that such operators are offering gambling without a licence from the local regulatory body, which means that your personal details and money can be in danger and you can end up a victim of scams.
You do not need to worry about going through a KYC check as this means that you are making your bets at a licensed casino or sportsbook. Operators authorised to offer their services by the UKGC must verify the profiles of all of their patrons to comply with the regulator’s AML policies. While it can be burdensome to provide so much personal information to verify your casino or sportsbook account, such measures are required to ensure that there are no illegal activities on the website where you gamble your real money.
In conclusion, we can say that you do not have to worry about virtual casinos and sportsbooks requiring KYC checks. This is a step that all companies that operate legally are required to implement in their business. With the gambling industry getting bigger and often being targeted by money-laundering organisations, it is natural for gambling firms to be required to go through the same checks as major financial companies and banks do.
