Knowing your customer is one of the most fundamental aspects of any business, but for those in the online gambling and gaming sector, it's also a regulatory requirement.
Traditional casino gambling has long been recognised as a risk for money laundering, thanks to its cash-intensive nature.
Online gambling and gaming take the risk to a new level, creating more opportunities for criminals to launder money or participate in fraud and other financial crimes.
That's why, in Australia, every online gambling and gaming business is subject to the Anti-Money Laundering and Counter-Terrorist Financing Act 2006.
Under this law, online gambling sites must screen their customers through an identification verification process before letting them use their services.
In this article, we'll help you understand your KYC obligations for online casinos and gambling.
Know Your Customer (KYC) procedures are a necessary part of anti-money laundering (AML) and counter-terrrorism financing (CTF) compliance.
Australian regulations require qualifying organisations to verify the customer's identity before providing services to them. In other words, you must ensure that your customers are who they claim to be.
Customers are required to provide credentials such as personally identifiable information (PII) and some form of an identity document.
The company must also document the identification procedures they use for different types of customers. These procedures must be based on the level of money laundering and terrorism financing risk of different customers and can include:
However, Know Your Customer processes shouldn't just be seen as obligations that online gambling sites must implement as a part of Anti-Money Laundering regulations — they can also safeguard online casinos and gambling companies against account takeover attacks and money laundering efforts. In addition, these checks also protect customers who may otherwise be at risk of financial crime.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime.
Along with businesses in financial services, the gambling sector has been identified as posing a risk for money laundering and terrorism financing. It therefore is regulated by the AML/CTF Act.
Regulated companies must apply risk-based customer due diligence (CDD) measures to prevent their businesses (and customers) from being successfully targeted by money launderers or terrorist financiers.
These checks help businesses verify their customer identities accurately against trusted government sources, whilst also searching and monitoring other datasets such as Politically Exposed Persons (PEPs) and Sanctions watchlists to help reduce the risk of financial crime.
To verify their identity when opening and operating an online gaming or gambling account, customers are typically required to provide credentials, such as identity documents proving their name, age and residential address.
That identifying information is matched against numerous legitimate, high-quality data sources to determine its validity.
It's also important to note that there are certain exemptions to finalising the customer identification procedures in Australia. For example, the online wagering company must verify the identity within 72 hours, and the customer can only withdraw funds once their identity is verified.
Not carrying out required KYC checks can result in penalties by regulatory bodies.
In November 2022, AUSTRAC announced an investigation into two of the online gambling industry's most prominent players, Sportsbet and Bet 365, over potential breaches of money laundering laws.
The two companies may face multimillion-dollar fines and severe regulatory interventions, depending on whether external auditors find them to have adopted and maintained a risk-based system to identify, mitigate and manage money laundering and terrorism financing and whether they conduct a thorough vetting of their customers.
As competition heats up, a streamlined customer onboarding process is critical for online gambling companies. However, the need to check the customer's identity means filling out extra form fields and attaching documents – something that can be frustrating for customers. If the process is slow and complicated, they might leave the site before they've even finished opening the account.
With an automated identity proofing and compliance platform, online gambling companies can quickly verify customer identities through various digital identity verification methods based on the risk level.
This ensures the company can implement a risk-based strategy that allows for a fast and seamless customer onboarding experience while meeting regulatory compliance.
Find out more about GBG's Identity Solution can help you to stay on top of your regulatory requirements, while streamlining the customer onboarding experience.
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