Experts of the CASEXE studio explain how artificial intelligence is transforming risk management and customer identification processes on gaming sites. You will find out about the benefits of AI and how the implementation of this technology is regulated by law.
The gambling industry is one of the most regulated sectors of the economy, which demonstrates the critical importance of the KYC system for online casinos.
Know Your Customer is a set of procedures aimed at checking visitors to gambling sites. Operators are obliged to make sure that there is a real and adult person on the other side of the screen and not a bot or fraudster.
The KYC protocol is usually launched at the time of registration on the resource. Players must not only come up with a username and a password but also go through verification.
Casino portals request the following data:
Based on these facts, synchronisation with databases of problem customers is carried out. This makes sure that clients do not suffer from ludomania.
In some countries (for example, Germany or France), the KYC system is activated when the initial deposit is made. Until such a moment, gamblers simply get acquainted with the website, the product range, and available payment methods.
There are also jurisdictions (for example, some states of America) where verification takes place at the time when the prize money is withdrawn to the player’s bank account or card.
The introduction of this tool was first discussed in 1970 when the Bank Secrecy Act was passed in the US. Initially, the requirements applied only to financial institutions. In 1985, the procedure became mandatory for land-based casinos as well.
In the mid-2000s, iGaming platforms also started to carry out client verification.
Today, digital entertainment portals must also check customer due diligence (CDD), given the high risks of fraud on the Internet.
Within the framework of CDD, entrepreneurs are required to:
Compliance with identification requirements gives operators a competitive advantage.
Casino games are more susceptible to aggressive actions of criminals than other sectors of the economy:
The decision to add KYC mechanisms to digital casinos allows entrepreneurs to identify fraudsters at the stage of registration. Most of them are eliminated automatically. It protects operators from multi-accounting, as well as theft of rewards and confidential information.
Availability of KYC is one of the main requirements of any regulator. Even at the stage of filing an application for a permit, project owners are obliged to describe all stages of comprehensive identity verification in detail. Otherwise, the commission may refuse to issue a certificate.
Entrepreneurs must also adhere to CDD principles: identify clients in a timely manner and automatically block problem users.
KYC is the main mechanism for verifying the age and location of gamblers. It helps filter out minors and those clients who place bets from countries where entertainment for money is prohibited.
Owners of iGaming sites are legally responsible for compliance with laws on anti-money laundering and anti-terrorism financing. It is even theoretically impossible to fulfil these requirements without CDD algorithms. Online casinos process thousands of transactions per day. Their careful evaluation is ensured, thanks to KYC.
Primary data collection takes place during the registration and verification procedure.
Based on the information received, operators group clients according to the following criteria:
Detailed profiling improves interaction with the audience and increases the effectiveness of marketing campaigns that are aimed at attracting and retaining clients.
AI technology made a revolution in the Know Your Customer system since it can conduct predictive analysis, monitor the behaviour of users, and quickly identify anomalies or suspicious actions of players.
Let us consider why more and more business owners are using KYC together with AI.
Both solutions are similar in many ways. They rely on patterns in data sets that are represented as multi-layered files of disparate information.
Such a symbiosis instantly reveals hidden relationships between variables that are difficult to notice during a single KYC verification. Thanks to this, authentication in online casinos takes a few seconds and does not require the operators’ physical intervention.
Manual labour is completely replaced by AI. Entrepreneurs can concentrate on strategic tasks, as well as business development and scaling.
How automatic KYC verification is carried out:
AI guarantees high-quality examination of all possible problems:
This is an integral part of any compliance program which is aimed at already existing customers.
The most common situation is when a casino visitor places bets on several legal platforms simultaneously.
If one of the virtual establishments includes a specific gambler in the register of persons with an increased risk of developing ludomania, restrictions on the size of bids, the number of spins, and the time spent on the website should be applied to such a user.
AI algorithms ensure instant synchronisation with government databases. Operators see that their competitor has included the player in the state register and automatically apply the necessary measures to such a client.
Artificial intelligence can track money transfers in real time and detect fraudulent activity or violations of AML procedures.
The technology helps in remittance monitoring by providing the following aspects:
The future of KYC is closely related to the implementation of artificial intelligence and other popular technologies (blockchain, as well as virtual and augmented reality).
In 2022, the US government, represented by FinCEN, published guidelines that approve investment in the growth of AI. American authorities are ready to support FinTech companies that use such a tool to comply with AML specifications at the legislative level.
At the beginning of 2023, the FATF published its annual report. The international organisation spoke highly of new KYC and anti-money laundering technologies, as well as the ability of AI to accurately analyse data in real time and identify risks.
The new EU Artificial Intelligence Bill specifies that the solution must not violate any fundamental rights, including unlawful discrimination. If the document is signed, then in the future, it will be valid along with the GDPR (European data protection rules).
The introduction of KYC mechanisms is a prerequisite for a legal operation in the iGaming market.
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