Anti-money laundering (AML) and know your customer (KYC) regulations are used across the financial sector. If you’re opening a new bank account, making a large transfer, investing in stocks/shares, or creating a trading account, you will be asked to complete these checks. And if you’re the provider offering this service, there are a wealth of very strict rules that you must follow.
The financial sector is where regulators seem to focus most of their attention, as it’s also where money launderers expend most of their efforts and spend most of their ill-gotten gains. But there are other sectors that are subject to AML and KYC regulations, including a few that might surprise you.
The art sector is thought to have been used by criminals and money launderers for a number of years. Art dealers don’t always want their purchases to be publicised. They can be very secretive people. So, if they purchase an expensive piece of art and request a level of anonymity, it will be granted.
That purchase can then be stored away for a rainy day. It’s much easier to store than a stack of cash and it can always be sold when needed.
It’s a win-win for the criminals, or rather, it used to be, as regulators have since clamped down on this activity. Art dealers are now expected to perform KYC/AML checks on their buyers, creating a paper trail that confirms the individual’s identity and ensures they are not on a watchlist, sanctions list, or subject to any kind of serious criminal charges.
It should be noted that these rules aren’t limited to paintings and other artwork. They apply across the entire art and antiquities sector, thus spanning a wide range of high-ticket items commonly sought by money launderers.
The Real Estate Industry
If you have ever bought or sold a house, you’ll know that the real estate industry is often subject to KYC and AML laws.
Take the house-buying process as an example. You will be expected to undergo the usual checks from the bank supplying the mortgage, but you’ll also be asked to jump through a few hoops by the conveyancer.
They are required to perform these checks by law, even though the bank has likely already conducted them.
So, what’s the issue here?
Well, as you might expect, property is a pretty big target for criminals trying to launder money. A single property purchase can run into the 7 and even 8 figures—that’s a lot of dirty money to spend on a single transaction. It could also give sanctioned entities access to lucrative property markets, as seen in London, where Russians have been buying up property for many years.
The house-buying process is long, boring, and often frustrating, and if you’re asked to complete a KYC/AML check for the second and even third time, there’s a good chance you’re going to be frustrated. But it’s clearly an important step, so keep that in mind the next time one of these requests lands in your inbox.
The Online Gambling Industry
As noted in a previous blog, the online gambling industry has some of the strictest KYC and AML rules. In many ways, it’s just as important as the financial sector in the fight against money laundering, as many criminals see it as an easy way to clean up their money.
After all, gambling income is not tracked or taxed in many countries, and when you consider the colossal size of some online jackpots, it’s not uncommon for someone to suddenly get thousands or even millions in their account.
What’s more, while AML regulations in the financial sector have gotten stricter in recent years, making life very hard for criminals, the same can’t be said for the gambling sector. Sure, the rules are tough and the means of tracking illegal activity is better, but the introduction of cryptocurrencies has given criminals an outlet that can’t easily be tracked.
It’s not just about money laundering, either.
KYC laws are arguably more important in the online gambling sector. They are used to determine whether or not a player is above the legal gambling age. If not, the casino could face substantial fines and other penalties for granting access. Operators also have a duty of care when it comes to problem gambling. They are expected to look out for signs of irresponsible gambling and ensure that anyone who has self-excluded or joined exclusion programs is not given access.
It’s a lot to consider, and it can create many steps for players and casinos alike.
Take the United Kingdom as an example, which is overseen by the UK Gambling Commission.
All new players are expected to enter their full and correct details when they first join a regulated gambling site. These details will then be checked against existing credit reports using a soft credit check (one that automatically checks the player’s credit history without leaving a negative mark and reducing their credit score). If there are discrepancies, such as an incorrect address or name, the player will be asked to submit proof of ID and proof of address.
Typically, a valid payment method will also be required, such as a debit card. Only when these steps have been completed is the player able to make a deposit and play games.
In fact, with the exception of a deposit, those same steps must be completed by players who wish to play free slots. These games don’t have any real money prizes and are free to play, but the regulators see them as promoting gambling and thus require similar steps.
Summary: AML and KYC Checks
If you’re involved with any of the above industries or any other sector that adheres to KYC and AML rules, contact A Data Pro for help. We have extensive due diligence reports and sanction list checking to prevent your company from doing business with sanctioned entities. We’ll help you to stay compliant and safe and ensure you’re doing your bit to stop money laundering.