AML and KYC in iGaming in 2024

With the various technological advancements and the overall improvement of user experience, it’s expected that iGaming will continue growing. The convenience of gaming from the comfort of your home has been attractive to many traditional casino-goers.

Whether you like online slots, casinos, or blackjack, there are tons of different options that you can find on the internet. However, online casinos should adhere to various regulations and laws. Unfortunately, there are still shady online platforms that you should avoid at all costs.

Legitimate online casinos have to comply with anti-money laundering and know-your-customer regulations, which shows that they operate fairly. More importantly, by following these legislations, the chances of fraudsters or money launderers exploiting a casino are minimized.

This article will take you through the landscape of iGaming in 2024 and the importance of compliance with AML and KYC legislations. More importantly, we will explore the ways in which certain tools can streamline this process.

KYC in iGaming explained

Preferring privacy on the internet is totally understandable. Many individuals aren’t comfortable with sharing information that they consider too personal with businesses. However, some businesses have a good reason why they ask for information such as name, address, or personal documents.

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Imagine if anyone could just walk into a bank, open an account, and put a million dollars into it without any background check. To prevent such shady situations, iGaming businesses utilize KYC verifications to ensure that the person can be trusted. 

This process includes a series of security checks and the data that’s required can greatly vary depending on the business. Some go as far as requiring an ID while others only want your name and address.

KYC ensures that the person who makes an account isn’t associated with crime or money laundering.

AML in iGaming explained

iGaming businesses have a lot of regulations that they must adhere to. Unfortunately, regulatory bodies are sometimes powerless to ensure that they operate properly. Because of much looser regulations, online casinos attract people who want to launder money.

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Anti-money laundering procedures are there to minimize the chances of such individuals successfully executing their ideas.

There are various providers for AML software that you can find to ensure that your online casino is functioning properly. These software can include transaction monitoring, ensuring that large sums are examined on time.

Furthermore, real-time alerts will get the casino’s attention to such transactions. With ID proofing tools, AML solutions ensure that the documents provided by the users are legitimate. In this context, AML complements KYC procedures.

As a part of the KYC process, AML tools allow you to inspect Politically exposed persons (PEP) or other individuals that might be blacklisted. Once you understand who that person is, you can check whether you’re allowed to do business with them.

Dangers of money laundering

Criminals use online casinos to convert money that’s obtained through illegal methods into online chips or currencies with no background checks. Eventually, they can cash out these chips into money that’s laundered.

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The reason why criminals pick online casinos is because they are often anonymous. This way, there aren’t many ways to confirm what’s the source of the money and whether the individual that’s behind the deposit is a criminal or not.

In some situations, criminals can use fake or stolen identities, which just shows how important it is to have strict regulations on who can make an account.

Online casinos also have extremely high volumes of transactions. With millions of transactions happening during the day, it’s hard to single out transactions that seem fraudulent. AML solutions that offer real-time protection are really helpful in this situation.

While beneficial for regular users, the international reach of online casinos allows criminals to avoid borders and launder money in other countries.

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One of the common methods of withdrawing money is credit cards. However, credit cards are usually associated with an individual. To avoid this, criminals often use cryptocurrencies, which gives them the possibility to make anonymous transactions.

The role of cryptocurrencies

The noble idea of a currency that knows no borders and allows individuals to make anonymous and quick transactions is spoiled with malicious individuals. Because of the anonymous nature of cryptocurrencies, many criminals are using them to launder money.

Just because an online casino allows the use of cryptocurrencies for deposits and withdrawals, it doesn’t mean that it’s helping money launderers. However, it’s one of the top methods of cashing out laundered money.

This is why it’s important to give extra attention to transactions that happen via cryptocurrencies.

How KYC and AML prevent money laundering

Software that’s used for money laundering prevention should come with multiple features that prevent common criminal methods. Key features that AML software should provide are full compliance with legal obligations and real-time protection from fraud.

These solutions need to operate discretely and they mustn’t interfere with the user experience of the gamers. If they slow down the gaming experience has the chance of demotivating players from playing.

Many gamers also don’t want to reveal their passion for online casinos to their friends and family, so this software should also value their right to privacy.

One method besides the use of software includes limiting the amount of money that can be deposited and withdrawn. Furthermore, requiring gamers to actually gamble with the amount they deposited is also important.

Criminals might want to deposit and withdraw without actually playing any games, and such restrictions should prevent them from doing that.

KYC and AML can prevent money laundering from recognizing certain red flags in the activities of the gamers. For example, constant deposits of large sums that aren’t used for anything besides betting on low-risk games.

Criminals often want to hide beside multiple proxies or use different devices. Of course, this can be a sign that an individual plays from different Wi-Fis, but paired with frequent large transactions or rapid withdrawals can be a sign that this isn’t legit.

With the rise of AI and ML solutions, the possibility of recognizing anomalies has increased. AI and ML are great at analyzing vast amounts of data and understanding what legitimate and illegitimate behaviors are. This way, you can spot problematic accounts and analyze them more closely.

Challenges of AML and KYC implementation

Although both AML and KYC are essential for an online casino to operate legitimately, there are some challenges when it comes to their implementation. To start off with the gamers themselves many of them prefer privacy.

They might have personal reasons why they don’t want to associate their identification information with an online business. Whether they fear that their data can be misused or they prefer privacy, those are legitimate reasons. So, some gamers might avoid casinos with extensive verification.

iGaming platforms often operate in multiple regions. Even though this allows them to attract more users, harmonizing with regulations in multiple regions can be quite hard. This can be quite limiting for many businesses in this niche.

Implementing effective solutions can sometimes require additional expenses or personnel. Furthermore, implementation of AML and KYC isn’t a one-time task and this is a process that should be handled in real-time.

The personnel handling AML and KYC procedures should be trained in using such solutions and have an understanding of the procedures if something isn’t functioning properly. AML and KYC systems can generate false alarms, which can sometimes cause all kinds of problems for nothing.

AML and KYC are essential for the safety of iGaming in 2024

It’s unlikely that online casinos will be able to proceed into the future by avoiding these types of regulations. Those who are somehow avoiding the implementation of AML and KYC procedures can be up for hefty fines.

In case someone starts inspecting an online casino, then they can be sued and shut down. But the worst case scenario could be being associated with criminal activity. This can mark people involved with the operation of an iGaming platform as criminals for no reason.

Implementing AML and KYC measures can protect you from becoming a victim of criminal activity. Furthermore, this will protect your users and, eventually, your reputation. Although AML solutions can require a subscription, the price you pay is nothing compared to the fines for not adhering to laws and regulations.

AML solutions also come packed with other features allowing online casinos to operate more efficiently, and prevent criminals from interfering with their operations.

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