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 financial 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.
What are KYC checks?
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:
- ID card verification
- face verification
- document verification such as utility bills as proof of address
- biometric verification.
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.
KYC regulations in Australia
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.
What KYC checks are required?
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 requirements for finalising the customer identification procedures in Australia.
From late 2023, Zero Day Verification (also known as pre-verification) will be a regulatory requirement in Australia. This will require wagering companies to verify a customer’s identity within 24 hours, rather than the previous 72 hours. A customer can only place a bet and withdraw funds once their identity is verified.
This also enhances protection for underage or individuals who have chosen to exclude themselves from betting through BetStop, the national self-exclusion register for online wagering launched in August 2023.
Protecting players online is essential for socially responsible online wagering companies. Better player protection now will go a long way to help operators build trust in the sector and create a safer gaming environment for players.
The risk of not carrying out KYC
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 over potential breaches of money laundering laws.
The 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.
Streamlining onboarding with KYC
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.