Verification knowledge hub
Learn how to avoid painful fines and reputational risks brought by non-compliance with casino regulations.
Global online gambling and betting is predicted to surpass $172.23 billion by 2030. As the industry continues to grow, regulators will start taking an even closer look, raising the potential for huge fines. Just two years ago, online betting firm Betway was handed the biggest fine in UK gambling history—a record £11.6m ($14m)— for failing to fulfill obligations to prevent both money laundering and problem gambling.
This article considers the most common mistakes in casino compliance, as well as some unexpected issues that firms regularly face, with real-world examples.
Sumsub’s legal team has also included a casino compliance checklist to further help you avoid painful fines and reputational damage.
Fraud has become a real menace for the gambling industry, with schemes like bonus hunting, multi-accounting, account takeovers and illicit chargebacks on the rise.
Sumsub is here to help. With this guide, you’ll be able to:
Casinos often neglect identity checks by failing to adequately automate the process. For example, Videoslots failed to perform an accurate identity check on a client, who managed to pass verification with a fraudulent driving license, resulting in a £1m ($1.2m) fine for the company.
Identity verification is critical for singling out fraudsters and underaged users trying to access casinos. To stay up to date with regulatory requirements and properly conduct checks, gambling operators are required to implement KYC—a legal requirement for complying with AML laws. To do this, companies should implement the following:
Inadequate proof of source of funds (PoSoF) checks can be a serious violation of AML requirements. Casinos often allow a customer to gamble while being led into the dark about the source of their money, which could easily have been obtained illegally. Casumo (fined £5.85m or $7.1m) and Betfred (fined £322k or $390k) both went down the same road.
Determining a client’s source of funds must be the first item on the agenda for any casino. This way, businesses can block offenders who deposit illegally obtained funds, as well as addicts who steal from their family to place a bet.
Once a client has been onboarded and verified, some casinos lower their guard. Yet, failing to scrutinize sources of funds and transactions on an ongoing basis is another serious AML violation. Daub Alderney, a casino which runs aspers.com, kittybingo.com, luckypantsbingo.com, luckyvip.com, magicalvegas.com, regalwins.com, and spinandwin.com, was fined £7.1m or $8.6m for failing to conduct appropriate ongoing monitoring of a business relationship.
A customer’s risk profile may change over time, which calls for
Assessment of affordability is now part of the customer interaction guidance of provision 3.4.3 of the UK Gambling Commission, which will come into effect on September 12, 2022.
As the Gambling Commission advises, operators should identify clients experiencing or at risk of harm and intervene to earliest opportunity. Open source data can help operators assess affordability for their UK customer base and improve risk assessment.
There are many cases of casinos setting deposits at inappropriately high levels, compared to the average amount that most can spend on leisure activities.Online casino company 888 failed to carry out proper financial checks until their customers had deposited £40k ($48.5k). As a result, one vulnerable client lost £37k ($44.9k) in just six weeks during 2020. A £9.4m ($11.4m) fine followed, which is the third highest in the history of British gambling regulation.
Some casinos neglect proper risk assessment, failing to spot clients with a higher risk of money laundering and skipping over requests for proof of source of funds. The most high-profile example of this is online betting firm Betway, which was handed the biggest fine in UK gambling history—a record £11.6m ($14m). Betway was proven “inadequate” in its dealings with several clients, failing to fulfill their obligations to prevent both money laundering and problem gambling to allow £5.8m ($7m) to flow through the business, some of which was stolen money.
Enhanced due diligence (EDD) is the ultimate defense against suspicious, high-risk and criminal users. EDD is a type of Customer Due Diligence for additional risk assessment, ranging from requests for more information to verification of sources of wealth and funds, as well as getting senior management approval before starting the business relationship.
When gambling becomes more than just a hobby, things can go south. Customers can spend more than their income, selling property or even stealing money from relatives to fund their next bet. And if casinos don’t monitor for signs of such behavior, they’ll be on the hook for it.
There are countless casinos who’ve failed to address addiction among their players, including: William Hill (fined £6.2m or $7.5m), Paddy Power Betfair (fined £280k or $340k), Sky Bet (fined £1m or $1.2m), Caesars Entertainment (fined £13m or $15.7m), and 32Red (fined £2m or $2.4m).
But is a fine enough to compensate for a human life? In 2017, a 24-year old English teacher committed suicide after years of severe gambling problems. His parents claim there is outrageously little public information raising awareness of the consequences of gambling addiction. Casinos can help by comprehensively informing gamers about the risks and closely monitoring their behavior for troubling signs.
One of the biggest problems for casinos is detecting gambling addiction. Still, under UK regulations, casinos must be able to recognize when a user spends erratically or beyond their means.
For ages, casinos have been a highly popular form of entertainment with a problematic reputation. Today, we’re seeing an opportunity for things to change for the better. New legislation is promoting transparency and trustworthiness in gaming. This is evident in regulatory mechanisms preventing money laundering—a historic vulnerability of casinos—as well as responsible gaming principles that protect clients from serious losses and operators from ruined reputations and fines.
Sumsub is an online casino KYC provider that helps gambling businesses comply with AML regulations. Talk to our team today.