What is KYC and Why Is It So Important?  

Patrick Lynch
By Patrick Lynch
Sports & Casino Expert
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Updated Jan 10, 2023
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Read time 14 min

Legitimate online casinos and gambling sites must engage in Know Your Customer (KYC) procedures. While they can be a grave inconvenience for players, KYC protocols are important in fighting against money laundering and financial crime.

Unfortunately, the size of the gambling industry, which could be worth over $94 billion per annum by 2024, means it is a prime target for criminal activity. Global financial crime costs society at least $1.4 trillion per annum, with everything from online bank hacks to terrorist funding and bribery falling under its umbrella.

Therefore, betting companies are under pressure to be KYC compliant and engage in strict anti-money laundering (AML) checks. Consequently, you must complete KYC verification when registering with a gambling site or online casino.

This article investigates what KYC involves and outlines its benefits. It also discusses why many players are becoming agitated by the process and turning to no-verification gambling sites.

What Is KYC Verification?

KYC is mandatory customer verification that helps prevent financial crime. The process involves giving the gambling site personal identifiable information and official identity documents. The idea is for the individual to prove their identity and show that they are a legitimate user, not someone using the site as a front for illegal activities.

The lack of standardization in identifying and verifying players often frustrates gambling site customers. Consequently, the documentation requested by one site could vary from another, forcing you to scramble to find new information continually. Another irritating fact is that sites may ask for a second KYC verification once you have deposited or withdrawn a certain sum of money.

However, what IS standard is that you must provide a combination of proof of identity and proof of address.

Proof of ID documentation may include the following:

  • Passport
  • Valid driver’s license
  • National ID card
  • University ID card
  • Another valid form of photo ID which varies depending on where you live

Proof of address may include the following:

  • Utility bill
  • House deed
  • Bank statement
  • Lease agreement

Typically, this documentation must be less than three months old.

KYC verification is very much heading into the technological age now, however. Certain companies are offering sophisticated solutions, such as facial recognition systems. Whether gamblers will submit to such protocols remains to be seen.

Is Financial Crime the Only Reason for KYC Verification?

No. KYC has other purposes apart from uncovering and preventing fraud. One of its major societal benefits involves preventing underage gamblers from spending their money online. For example, only adults aged 18+ can legally gamble in the United Kingdom. KYC documentation involves proving that you’re old enough to place a bet.

Another plus point of asking for KYC verification is to prevent gambling addicts who have self-excluded from returning to lose more money. The rate of gambling addiction is likely far higher than originally believed across several countries.

For example, research published in The Guardian found that up to 2.8% of the British adult population may have a gambling problem. This rate is almost nine times higher than what a Gambling Commission phone survey found.

What Is KYC Verification in the UK and US Like?

We’re focusing on the United Kingdom and the United States, as they are two of the world’s biggest gambling markets. Before we proceed, it is important to note that betting and casino sites must adhere to the KYC protocols of any country it accepts customers from.

For instance, a business based in Costa Rica that allows UK customers must follow UK law regarding KYC. Gambling sites can’t claim ignorance of the law if they fail to ask for the required KYC documents from customers in a specific country.

What Does KYC Compliance Look Like in the United States?

Casinos were classified as “financial institutions” as part of the Bank Secrecy Act (BSA) of 1985. Consequently, they must file currency transaction reports (CTRs) for transactions worth more than $10,000. Furthermore, these enterprises must comply with the same AML and KYC rules as financial firms.

These days, online gambling establishments with annual gross revenue of over $1 million are classified as non-bank financial institutions (NBFI). As a result, they also have to meet the same criteria as banks regarding preventing money laundering, fraud, and other financial crimes.

The Financial Crimes Enforcement Network (FinCEN) ensures companies adhere to AML rules under the BSA. Online gambling sites must help the government fight against financial crime by flagging, identifying, and reporting ‘suspicious’ activity and transactions.

This process involves filing suspicious activity reports (SARs) for ‘unusual’ transactions of more than $5,000. Above all else, gambling sites must adhere to KYC verification procedures rigidly. Any deviation from these rules will result in huge fines.

In 2016, CG Technology, which trades as Cantor Gaming, was fined $22.5 million for poor AML provisions. It transpired that the company’s lax measures enabled 26 individuals, nicknamed the ‘Jersey Boys,’ to launder money through the platform with various bets.

What Does KYC Compliance Look Like in the United Kingdom?

In the UK, all online gambling businesses must ask customers to prove their age and identity before gambling. The Gambling Commission claims it is illegal for a company to ask someone for these documents AFTER depositing money.

It also discourages betting sites from asking for additional information when customers want to withdraw. Yet, many consumers complain that bookmakers continue to play by their own rules, only requesting verification once money is already in the customer’s account.

Gambling companies can ask for selfies if they believe there is fraudulent activity on your account. Once again, however, it doesn’t appear that the betting site has to show evidence that its suspicions are warranted.

Bettors in the United Kingdom also face the specter of affordability checks. This is a highly invasive process that requires customers to display several months’ worth of bank statements to prove they can afford to gamble and lose a certain sum of money. It is an extraordinary invasion of privacy that threatens the UK’s gambling industry, particularly the horse racing sector, which depends on betting revenue.

How Does KYC Benefit Gambling Sites?

Without KYC verification protocols in place, a gambling site is at major risk of allowing money laundering operations to take place. The largest online gambling platforms turn over millions of dollars each day. Bet365, one of the biggest fiat-accepting betting sites in the world, reported revenue of $3.76 billion for the year ending March 2021. Individuals interested in money laundering will see gambling sites as a great way of ‘cleansing’ their cash.

KYC verification also helps bookmakers keep their house edge, even when some practices are unfair to customers. For instance, Bet365 is often nicknamed “Bet £3.65” because it tends to ban or restrict moderately successful players. It can use KYC to help top up its billion-dollar empire.

Restricted players may try to open accounts under different names or by getting help from friends. The KYC process makes things harder and ensures that successful bettors, who have broken no rules before, are now engaging in a prohibited activity. The betting site is free to close these new accounts. Ultimately, bookmakers are allowed to have practically no risk in a risk-free industry, aided and abetted by the refusal of various governments to act.

Why Are Players Moving Away from KYC Gambling Sites?

A growing number of gamblers are moving away from fiat currency sites that are obligated to implement strict KYC verification measures. Crypto gambling sites are becoming an increasingly popular alternative because they ask for less information.

Current KYC protocols may offer protection of sorts, but they are becoming increasingly invasive. Customers are not happy to submit sensitive bank details and a myriad of other information. After all, revelations of gambling on a bank statement can cost loan opportunities. For instance, you could have a mortgage application rejected because of a single instance of online betting appearing on your account.

If the above isn’t bad enough, the KYC process is often slow and frustrating. The lack of standardization in document requests means users have to submit different details repeatedly. Naturally, customers are concerned about losing privacy, since several online entities now have access to sensitive information.

With an increased demand for online gambling services, given the sector’s rapid growth, KYC verification checks are taking longer and longer. In some cases, customers must wait up to a week for approval. That is if the site doesn’t email back asking for yet another piece of private information!

In contrast, players can use certain crypto exchanges that don’t ask for much information. Then they can transfer funds to crypto gambling sites with less rigorous KYC requirements. Indeed, some sites don’t ask for any verification details whatsoever.

However, as you can imagine, the decentralized nature of cryptocurrency enables fraudulent betting companies to thrive. Therefore, it is a huge risk to register with a gambling site and deposit digital currency without reading the CryptoBetting team’s reviews. We perform a deep dive into every site we review to ensure there are no red flags. You’ll be the first to know if the site is dubious, has bad customer service, or gives us trouble when withdrawing.

KYC May Offer Protection, but at What Cost?

Ultimately, KYC is crucial to the gambling industry. Without it, perpetrators of financial crimes could launder their money easily. Sites that have failed to comply with KYC verification rules could be punished severely with huge fines as the minimum penalty.

Furthermore, if a gambling site doesn’t ask for KYC documents, it will soon attract a massive volume of fraudsters who will use the company as an illegal piggy bank for as long as they can get away with it. If betting sites were not KYC-compliant en-masse, governments worldwide would probably shut down the industry or severely restrict it.

However, there are severe downsides to KYC from a player’s perspective. Gambling sites are now asking for an increasing volume of personal details, which represents a security risk for customers.

In the modern era, a growing number of gamblers are turning to crypto betting sites. As well as benefiting from a decentralized currency, players know that these entities ask for relatively little information compared to their fiat counterparts. Yes, sites such as Stake.com may ask for baseline KYC information, but it is often less than what you must hand over to traditional bookies.

Also, the superior withdrawal speed associated with crypto casinos is another big factor in their growing popularity. You’re less likely to receive additional documentation requests upon a decent-sized withdrawal than with a fiat-accepting gambling site. 

There are also no verification casinos, which enable you to gamble anonymously. However, be wary of such sites because they can easily rip you off since there is a lack of information about such enterprises online! Once again, we advise you to read our team’s reviews and find out whether a crypto betting site you’re interested in is legitimate or bad news.

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Patrick Lynch
Patrick Lynch
Sports & Casino Expert

Patrick has been a professional writer since 2009. He knows the issues players face when trying to find reputable casinos and performs forensic analysis on every site he reviews. Since joining in 2021, Patrick has had his eyes opened by the potential of the cryptocurrency market. With a background in sports betting, he realizes the possibilities afforded to successful bettors when using digital currency.