Overview of AML and KYC for online gamblers and sports betting

Although AML and KYC measures can make it a little slower to sign up for online gambling and sports betting websites, the regulations are ultimately intended to make things safer for everyone.

Jun 2, 2020
5 mins

Online gambling and sports betting are exciting pastimes and, for skilled players, a potentially lucrative source of income. However, if you have ever attempted to sign up for a new online gambling service or tried to cash out large winnings, you will likely have encountered an irritating and sometimes slow identity verification process. 

Identity verification is part of know-your-customer (KYC) and anti-money laundering (AML) legislation that online casinos and sports betting sites must comply with. What are these regulations, why must online gambling sites comply and what do they mean for you? 

What are AML and KYC?

AML and KYC are regulations designed to ensure that financial institutions like banks, hedge funds and casinos are not used by criminals to launder money:

Anti-money laundering (AML)

Regulations are imposed by national governments and international treaties. AML is an umbrella term and covers a wide range of obligations and processes which different kinds of financial institutions must comply with.

Know-your-customer (KYC)

An important process underneath the AML umbrella. It requires financial institutions, including casinos and betting companies to conduct background checks on their customers to identify possible criminal behaviour.

While casinos and sports betting sites are very different to banks or investment firms, they are at risk of being used by criminals to launder money. Indeed, one report estimates that one in every 20 new accounts on online gambling and betting websites is connected to fraud. As a consequence, they are required to comply with these laws.  

How do criminals use casinos and online sports betting sites?

There are several ways that criminals use online gambling websites. For those who make large sums of money through narcotics, loan sharking or the black market, it is not possible to simply deposit cash in a bank account without attracting attention. They may however use online gambling sites to ‘launder’ their money and make it look legitimate:

Placing low outcome bets

Criminals pay an intermediary to place lots of low outcome bets meaning they keep most of their money. This is then returned to their account as winnings and appears legal

Gnoming and chip dumping

These are forms of collusion. A criminal group will pay people to play games like poker or blackjack online and intentionally lose to one player. This individual then withdraws all their money as winnings and the criminals behind the scheme can safely withdraw cash from a bank account that appears legitimate

Other forms of fraud

There are several other ways that organised crime and individual fraudsters can use these sites to make money or launder ill-gotten gains.

To limit opportunities for criminals, regulators impose AML and KYC compliance on gambling and sports betting sites. 

KYC rules are also designed to:

  • Prevent underage gambling
  • Identify problem gambling
  • Exclude problem gamblers who have signed themselves up to self-exclusion lists
  • Stop people opening multiple accounts on the same website

What will you need to pass KYC requirements when gambling? 

The exact way that AML and KYC regulations are imposed vary from one region to the next. Generally, however, you will be required to provide:

  • Proof of age (usually from your passport, driving license or national ID card)
  • Proof of address (from utility bills and credit card statements)
  • Proof of payment methods (details about your bank account)

You will need to upload scans/photos of these details to the website’s system and they will be verified by the company before you’re allowed to deposit or withdraw money. 

For most people, the above information will be sufficient and you will usually be approved within 48 hours. However, in some cases you may need to provide further evidence on the source of your income, such as a bank statement, payslip, dividend certificate or similar. 

Providing this information can be frustrating but bear in mind that casinos and sports betting sites are required by law to do this, and the ultimate intention is to make online gambling safe and fair for everyone. 

Learn more: Read our blog on casino accounts for payments, brokerage and FX

What about location and data? 

Sharing your personal data with online gambling sites may feel uncomfortable. However, in most cases you’ll be protected by some pretty solid legislation. 

If you are from the UK or the EU, your personal data must be protected in a highly secure manner since online casinos that deal with EU and UK customers must comply with the GDPR, a ‘gold standard’ data protection regulation. The GDPR means that the data must be stored in servers within the EU/UK. You also have the right to access this data whenever you want and request it to be deleted permanently. 

When it comes to the location of the gambling company, your home country rules apply, rather than those in the destination country. If you are from somewhere which has strict gambling standards (such as the UK or the EU), you will still be subject to KYC tests even if you choose to gamble or bet on sites that are domiciled in locations with a more relaxed approach to gambling. 

For example, you might choose to gamble on a website which is domiciled in Costa Rica, which has a fairly relaxed approach to online gambling. However, if you’re from the UK or EU, the gambling website is still obliged to conform to UK/EU standards, including KYC checks. 

Money management for online gambling and sports betting

Although AML and KYC measures can make it a little slower to sign up for online gambling and sports betting websites, the regulations are ultimately intended to make things safer for everyone. However, when it takes up to 48 hours just to sign up to gambling websites, you don’t want even more bureaucratic hoops to jump through when moving money between the gambling site and your bank account. And this is where Xace helps. 

Xace is an FCA licensed payment institution that off accounts which are specially designed to be gambling friendly. Because we understand the online gambling sector in depth, our accounts are fine tuned to make it easy for you to make and receive payments from any certified casino or betting site. To learn more about Xace’s bank accounts for online gambling, read about our gaming bank accounts here

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