Online financial services have altered customer behaviors in recent years, with many choosing to conduct their business via apps and websites.
With so many customers choosing the convenience of digital banking services, the financial industry has invested considerable sums into ensuring security is robust.
Customers play their part in the security process through strict verification processes, and this is true of other industries as well. The gambling industry has made the most of mobile technology and improved connectivity to offer its customers a convenient way to access their favorite betting markets.
Online operators that deal with finances, take payments, and store sensitive data will typically have measures in place, with one of these being KYC.
What is KYC?
Know Your Customer (KYC) are the standards designed to ensure businesses verify who their customers are as a way to prevent fraudulent behavior, money laundering, or the funding of terrorism.
KYC checks are typically implemented when customers open accounts and can also take place periodically.
While KYC checks add another level of security for operators, it can make signing up and creating accounts a laborious process for the customer in both the finance and gambling sectors.
NoKYC’s editor-in-chief Philip explains that online anonymity is a factor that some online casino customers want. The best no KYC casinos are available to these customers, and they comprise pay-and-play or no-account casinos that allow players to deposit and withdraw via reputable payment services. Many of these options still require a sign-up, but documents don’t have to be provided directly to the casino.
In finance, extensive documentation is required when signing up for a new credit card or opening a bank account. Financial institutions have to be sure that their customers are who they say they are to avoid money laundering issues. The lack of KYC requirements is one reason behind the growth of cryptocurrencies, as KYC measures are not needed to buy, sell, use, and transfer crypto.
KYC Requirements in Financial Industries
Financial services in the U.S. are governed by a variety of regulators including the FRB (Federal Reserve Board, SEC (Securities and Exchange Commission), and FDIC (Federal Deposit Insurance Corp).
These regulatory bodies are in place to ensure financial institutions adhere to rules that protect customers, and customer information, and mitigate the risk of criminal activity.
KYC requirements include the Customer Identification Program (CIP) where customers must provide documents proving their identity and address.
The Customer Due Diligence (CDD) section of KYC sees the customer go through a risk evaluation process to determine the potential for suspicious activity.
Enhanced Due Diligence is typically reserved for higher-risk customers to ensure there is no risk that they are financing terrorism or laundering money.
KYC is governed by the FINRA (Financial Industry Regulatory Authority) rule 2090 and rule 2111 which cover KYC and suitability.
FinCEN (Financial Crimes Enforcement Network) also regulates standards to ensure customers and financial institutions adhere to AML (Anti-money laundering) compliance.
KYC Requirements in Gambling Industries
Regulatory frameworks for U.S. gambling operators can be a more challenging landscape to negotiate. Individual states determine their own gambling regulations, with separate regulatory boards created to govern compliance.
Online casino operators must adhere to state regulations to keep their licenses with many regulatory frameworks outlining exactly what is expected of them.
Gambling KYC requirements typically require the operator to identify the customer and source of funds by obtaining the relevant documents. Operators will also monitor transactions and develop risk profiles for customers.
Operators must report suspicious transactions and develop an AML program that is up to state and government standards.
States with legal online betting markets will outline rules and regulations that operators must follow. However, offshore betting operators can provide services to customers across all states and are often regulated in foreign jurisdictions where rules can differ.
Alternatives like the no-KYC casinos already mentioned provide players with a level of anonymity. However, they will need to provide details to payment services or to process large payouts in some cases.
How Gambling Operators Can Adhere to KYC Compliance Frameworks
Juggling KYC requirements with data protection rules can be challenging for gambling operators. However, new technologies are making it easier to deal with.
Implementing AI technology to help with KYC and monitor customer behaviors makes it easier for operators to identify suspicious betting patterns. It can also help with processing new account setups by checking that documents and the information provided by customers match up.
The automation of certain processes not only streamlines business practices but also improves the customer journey.