KYC In Gambling Industry: Why AML & KYC Are Necessary In Gambling

Want to know about AML compliance in the gambling industry? Check out this guide on gambling money laundering challenges & need of KYC in gambling industry. Read now!

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Need Of AML & KYC Compliance In The Gambling Industry

In the famous Gambler’s Ruin problem, two gamblers play against each other until one loses all his wealth to the other. Either way, at the end of the endeavor, one ends up losing financially, and hence the term Gambler’s Ruin. But it is not just the winner who takes the money home. The casino too, takes a cut. No matter who wins or loses, the casino that facilitates the gambling only stands to profit from it. But things have changed in the recent past. Today due to money laundering frauds and lack of KYC (Know your customer) compliance, casinos can be at the receiving end of fines by regulatory and policing bodies. Ladbrokes Global, a British gambling company received a fine of £5.9M in 2019 and Australian gaming company, Tabcorp also received a fine of $45M the same year. These are hefty fines and both were attributed to the online gambling places not having proper AML (Anti-money laundering) compliance in place.

How money laundering happens in gambling

The term money laundering came into use after notorious gangster Al Capone used several laundromats he owned to make illegal money he had into white.  Money laundering can happen in gambling in two ways:

Illegal money is paid to a bookmaker to place on a low outcome bet and clean money is received from the bookmaker in exchange. 

Illegal money is used to sponsor a bet by a person of no known criminal background on a gambling platform.

The role of regulatory bodies in AML

Can we do something about money laundering in the online gambling industry? Of course we can. Regulatory bodies have already put the foot down. The EU had released the fifth directive on Anti-Money Laundering which solved several ongoing issues with how money laundering was happening in the EU. In 2021, the EU then followed that up by instituting a new authority to fight money laundering. These measures can help ensure that gambling and financial institutions are not at risk of money laundering. That’s the regulatory bit though, and it varies from country to country and even state to state at times. In the US, laws such as the Bank Secrecy Act directs financial institutions to report cash transaction volumes exceeding $10,000, and to perform additional verification on the source of the deposit.

The problem with implementing AML

What can gambling companies do to ensure that money launderers do not win? And is it easy given the fact that the habit of gambling is on the rise? According to Statista, in mid-2020, the global gambling industry market size exceeded $200B. And of this, the online gambling market size exceeded $53B pre-2020. When there are so many gamblers out there, it is a challenge for a gambling company of any size to manage KYC compliance. But there is no go, is there? The bad guys need to be kept out of the system. The house needs to be so strong that no single big bad wolf or wolves can just huff and puff and blow it down. But this is not easy given that thieves these days have equally good access to advanced tech such as 3D printers and AI.  

Managing Customer Information

To help manage KYC and AML, casinos today use what is called customer due diligence (CDD). The customer’s information, including name, date of birth and a government ID such as a passport or a driver’s license is obtained before they place a bet, to ensure that the customer is not involved in criminal activities of any kind. This process can simply also be referred to as KYC (know your customer). In countries where the risk of money laundering is higher, an additional check known as extended due diligence (EDD) may be performed. EDD generally checks for the source of the funding. If the source of the funding is clean, then the customer can go ahead and place his bet. Else, all bets are off!

Need for KYC in the gambling industry

With the massive amounts of money spent by companies to ensure compliance, companies need to make sure they can successfully combat fraud and in turn, save money that would otherwise be spent on regulatory fines. The gambling sector is one of the biggest targets for fraudsters and financial criminals. Proper KYC and AML compliances in the gambling industry ensure online gaming providers don’t onboard fraudsters in disguise. Such individuals can cause irreparable damage to companies. Having multiple checks in place to verify the identities of users is a good practice that guarantees compliance. All these factors make KYC in the gambling industry an essential requirement for combating online fraud.

How HyperVerge can help with KYC and AML compliance

Using both high accuracy OCR (optical character recognition) and face recognition, and with sufficient training on samples of government documents for a given geography, HyperVerge can help companies meet AML compliance

  1. The face recognition system, which also runs parallel 1:N checks to determine identity is NIST ranked #3 in the world for its face recognition system. 
  2. The face recognition system is also iBeta certified for passive liveness detection, accurate and extremely user friendly, allowing a larger number of users to onboard in a given period. 
  3. The code for face recognition and OCR are also benchmarked against those of competitors to yield better accuracy over time. 

This makes for an AML check which is compliant with standards and makes no misses. To know more about how we can help with KYC and AML compliance, talk to us

Nupura Ughade

Nupura Ughade

Content Marketing Lead

With a strong background B2B tech marketing, Nupura brings a dynamic blend of creativity and expertise. She enjoys crafting engaging narratives for HyperVerge's global customer onboarding platform.

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