AI-Based iGaming Verification: KYC Procedure Simplification

Client authentication is a mandatory condition when registering on any gambling platform. The introduction of AI algorithms speeds up such a process, identifies criminal schemes, and successfully combats fraud.

Experts of the Rosloto company will tell you about the role and advantages of using AI in the iGaming industry and offer effective tools to protect casinos from risks.

KYC Rules in the Entertainment Niche

The concept means the identity verification of already existing and new customers. The collected and processed info is used to create financial profiles of players, prevent fraud, and fulfil other purposes.

The implementation of KYC policies is a key requirement of gambling regulators. Operators describe the authentication procedure at the stage of obtaining a licence. Without a reliable and understandable mechanism, no commission will issue a permit for launching an iGaming site.

Legal basis of the concept:

• EU Fifth Directive on Money Laundering (AMLD 5);
• US Bank Secrecy Act (BSA);
• EU Regulation for the Protection of Personal Data (GDPR), etc.

The implementation of KYC began in 1970 when the BSA came into force in the United States. It was initially aimed at traditional institutions such as banks, credit unions, and insurance companies.

In 1985, the requirements extended to offline gambling halls with slot machines. As the entertainment sector developed, the law also became relevant for the online niche (virtual casinos and betting shops).

The Main Components of KYC

Let us consider what player verification includes:

1. CIP. This is standard procedure. Clients enter personal data, as well as numbers and scanned copies of supporting documents. For the gaming niche, CIP protocols are of paramount importance. They allow operators to filter out minors and users who place bets from abroad.
2. CDD. This stage is necessary for the assessment of risks and protection against fraud, money laundering, and terrorism support. Most often, business owners check the financial condition of clients, the settlement methods they prefer, and the availability of funds in bank accounts.
3. EDD. It applies to high-risk clients. Entrepreneurs need to find out about the origin of the user’s funds and make sure that players or B2B partners are not caught in the legalisation of money obtained illegally.

Customer Identification Program (CIP) is mandatory for all licensed operators, and CDD scanning is optional.

In 2024, more and more regulators require that project owners check the solvency of gamblers and what funds (independent or borrowed) they place bets with. This policy is applied in the UK, France, Germany, Sweden, and other countries with a developed entertainment market.

Expected Date of Delivery (EDD) is used selectively in the sector. For example, in Croatia and Germany, all casino payments over €2,500 are subject to additional verification. It is mandatory for clients and B2B partners. It is important for regulators that the operators interact only with legal firms.

Benefits of Using KYC Methods

The main benefits of timely identification of online casino visitors:

1. Protection against fraud. Businessmen face hacking attempts daily, theft of personal data, bonus hunting, multi-accounting, and other types of violations. The introduction of KYC standards makes it possible to filter out potential attackers at the registration stage.
2. Work in the legal arena. Careful identification of individuals prevents access to the website for minors and people with signs of ludomania. Geolocation verification allows operators to accept bets from gamblers only from those countries where a permit was obtained.
3. Creation of game profiles. Already at the authentication stage, entrepreneurs can form a portrait of a future client. The data obtained will become the basis for a successful marketing campaign.

Non-compliance with KYC rules can result in the fact that casino owners will face financial sanctions and lawsuits and, in some cases, even the deprivation of a licence.

One of the largest fines was imposed on Paddy Power Betfair. The UK Gambling Commission has ordered the firm to pay £7.8 billion in compensation for failing to apply KYC and AML policies.

Business owners risk worsening their image if the identities of players are not timely verified. In 2024, payment companies, hosting providers, and content developers want to interact only with legal brands with an excellent reputation in the market.

The Role of AI in the Clients’ Authentication

The concept can be explained as the imitation of the processes of the human mind using machines and computer systems.

The technology can collect, remember, and handle terabytes of data, draw conclusions, as well as make informed decisions. Artificial intelligence is also prone to self-learning, deep analysis, and imitation of people’s behaviour.

The iGaming industry faces thousands of requests and hundreds of fraud attempts every day, so the use of AI is extremely important.

Time and Costs Saving

According to SWIFT, more than 90% of entrepreneurs report that meeting KYC requirements has become more difficult than 5 years ago. To process the received information, financial resources are also needed. Analysts report that 80% of the time is spent searching and studying data rather than fixing errors.

The introduction of AI allows casino owners to:

• reduce the expenditures for the KYC procedure’s support on a gaming site by 70%;
• increase the speed of processing and decision-making by 80%.

Biometric Identification Improvement

This is a popular method applied to digital resources.

The software analyses fingerprints, the structure of the retina, facial features, and other characteristics. The key task is to make sure that on the other side of the monitor, there is a real person with transparent positive intentions, and not a bot or scammer.

The introduction of AI improves and speeds up authentication, reducing the risk of fraud to zero.

Amazon presented an interesting solution at the intersection of AI and biometrics technologies. Its proprietary service is characterised by highly accurate image and video analysis.

The program allows operators to:

• determine the presence of faces in static pictures or videos;
• analyse the features of appearance: eyes (open or closed), mood, hair colour, and visual geometry.

In 2024, the popular dating app Tinder launched verification based on video selfies. The received data will be automatically processed using AI algorithms.

The function will completely replace identification by photographs, which may turn out to be fake, as well as simplify client verification and make the KYC procedure more secure.

Implementation of Adaptive Multi-Factor Authentication (MFA)

This method consists of several steps. When entering a gambling portal, a player is required to provide additional information apart from the password.

The most famous example of MFA is 3D Secure banking technology. It was developed by leading payment providers (Visa, MasterCard) for customer identification.

The key role of AI in the MFA system is to analyse trends and capture suspicious activity.

AI-based software can:

• track user actions for a long time;
• identify patterns in the behaviour of gamblers;
• create basic profiles of clients;
• fix unusual steps (attempts to log in at a non-standard time from uncommon geolocations and unknown devices).

AI programs collect and process terabytes of info:

• number of unsuccessful attempts to log into the virtual casino (lost password, incorrect entry, or failures in multi-factor authentication);
• geographical location of customers;
• physical distance between places from which consistent attempts to log into the system were made;
• devices used for accessing;
• IP address of the source, etc.

The special software considers missing info as a risk factor. Thanks to this, operators successfully fight against multi-accounting and theft of bonuses.

Prevention of Fraud and Money Laundering

The technology identifies unique data points in different situations instead of applying the same rules to all verification scenarios.

To forestall the outcome, the special software studies and updates search criteria:

• For example, instead of checking transactions for a given sum, the software scans several payments at once.
• After that, the AI ​​generates notifications about potentially fraudulent transfers, even if they are below the threshold value (for example, €2,500 in a Croatian online casino).
• Transactions are sent to additional AML scanning, helping entrepreneurs prevent the legalisation of money obtained illegally.

Minimisation of False Alerts

Program components often work based on previously described rules. Security software and payment systems are not always able to take into account the context, which leads to a sharp increase in the number of false-positive cases of fraud.

AI-based solutions use more complex KYC algorithms. Thanks to this, only real violations are detected.

In 2023, Google launched a cloud artificial intelligence-based service for banks.

It can identify different cases of legalisation of income obtained in a criminal way based on:

• client data;
• typical transaction patterns;
• network behaviour of users;
• identification data of casino visitors.

Currently, the program is only available for the FinTech sector. In the future, it will benefit various industries, including iGaming.

The Future of KYC in the Entertainment Niche

Major content developers are already actively using AI identification.

In August 2023, the Alphabet Gaming Bulgarian bookmaker software vendor signed a contract with the iDenfy company, which will supply age verification tools based on artificial intelligence. Its proprietary solution features simple integration and a fully automated client onboarding process.

The brand’s four-step authentication helps identify fraudsters using pre-recorded videos, deepfakes, masks, and altered images.

In 2022, the Hellenic Gaming Commission (HGC) announced the signing of a memorandum with the Mindway AI Danish firm. The innovative manufacturer provides software based on artificial intelligence and neurobiological research to identify risky customer behaviour.

Operators from Norway actively use the SpillePuls (Play Pulse) program from Norsk Tipping. This digital dialogue tool processes data in real time, reducing the cases of ludomania and filtering out scammers.

The future of KYC is also associated with SCA. Transfers via bank cards within the EU and the UK are subject to additional verification.

The procedure has already been introduced by leading European payment providers (Visa, Neteller, Skrill, and PayAnyWay) to combat terrorism financing and legalisation of funds obtained illegally. It is expected that SCA methods will soon become available for the iGaming sector.

The Main Things about the Role of AI in the Verification of Users

The introduction of KYC tools based on this technology is mandatory for all legal entrepreneurs.

Key features of the procedure:

• Its advantages include protection against fraud, work in the legal field, and the creation of client profiles. Failure to comply with the established policies may result in the need to pay fines or deprivation of a licence.
• The use of AI algorithms makes it possible to reduce the time and money spent on verification and minimise false positive alarms of the system. The technology is quite useful during the implementation of multi-factor and biometric-based identification.
• European gaming commissions and casino software providers are actively implementing AI for customer authentication. The solution takes the fight against fraud to the next level.

You can order security software for iGaming sites from the best vendors in the industry by turning to the Rosloto studio.

Our specialists also provide the following useful services:

• turnkey casino creation;
• White Label platform installation;
• integration of payment systems;
• development of HTML5 slots based on individual sketches;
• marketing of already launched projects, and much more.

For all questions, please contact our managers.