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Know Your Customer (KYC) checks are an important part of many online businesses and serve as the front line in tackling criminal activity including money laundering and terrorism financing.
Stringent checks are in place with most financial institutions and other businesses that could facilitate the proceeds of crime, but this can be frustrating for legitimate customers who have to jump through the necessary hoops to set up accounts and access funds.
However, the potential that blockchain technology has to automate and streamline these processes could revolutionize the market.
The online gambling industry is already benefitting from blockchain technology with many consumers choosing no KYC casinos over traditional alternatives. Casino expert Andrew O’Malley explains that consumers using these sites can enjoy greater privacy without having to share personal information, faster access to sites, and quicker withdrawals.
These types of casinos have proven popular across the U.S. because of their fragmented gambling regulations. Each state has the autonomy to decide its own gambling laws, and those that prohibit online casino gambling have seen a rise in the number of consumers looking at offshore options.
Even the six states with legal online casino gambling, including West Virginia, see consumers choosing licensed offshore options because of the ability to sign up to sites without having to provide sensitive information.
This is achieved by allowing cryptocurrency payments so personal and banking information isn’t required for deposits and withdrawals. All activity carried out at these online casinos is available on the blockchain, a digital ledger that records transactions.
The transparency offered by blockchain technology allows greater data analysis and external audits to verify activity. It has also been suggested that linking real-world identities to blockchain addresses could strengthen and streamline KYC procedures.
Blockchain decentralization and immutable technology ensure it is a secure tool that makes the most of state-of-the-art technology. The scalability of blockchain technology is one key factor for its future use in KYC procedures, and the sophisticated algorithms used to analyze data more efficiently than traditional methods allow the security sector to keep up with sophisticated criminal techniques.
The analysis and visualization of blockchain fund flow make it easier to identify patterns that suggest criminal activity or money laundering. This improved data analysis can also help eliminate discrepancies and minimize the risk of other types of financial crime.
Trust in digital assets has been on the rise, with the most popular cryptocurrencies now accepted by a growing number of online retailers and service providers. This will make it easier for consumers to accept blockchain-based solutions when it comes to KYC and other security regulations.
As cybercriminals continue to refine their techniques, traditional KYC and security processes are beginning to look outdated. Utilizing the latest technologies including AI, ML, and blockchain technology will improve results and provide a better consumer experience.
If KYC procedures are quick and easy to complete, it will also mean that consumers may stop looking at alternatives that don't require stringent procedures.