Due Diligence is a comprehensive and objective assessment of a business. The procedure includes checking the financial condition, goals, and development strategy of the company, as well as its compliance with certain quality and safety standards. Typically, Due Diligence is conducted not only on the business, but also on its owner and key persons. The latters are checked for trustworthiness, lack of criminal history and competence.
Due Diligence is an essential part of the gaming license acquisition process in most jurisdictions. Keep reading to find out why gambling regulators require you to pass it and how to do it successfully.
The role of Due Diligence in obtaining a gaming license
Issuing licenses for casinos or sportsbooks is a responsible task that the competent authorities of jurisdictions approach with the utmost seriousness. Any oversight in the business verification process can lead to the legalization of an unreliable operator, and subsequently to fraud and money laundering in the industry. This is why it is so important to conduct a comprehensive analysis of the gambling company and the licensed project before issuing a permission. Assessing honesty, transparency, reliability and prospects of a potential operator is the main goal of Due Diligence.
Due Diligence is usually carried out after the application for a license is submitted. What exactly do regulators check?
- The information about the legal entity provided by the applicant is checked for its accuracy. In particular, the financial condition and the presence of possible debts are subject to verification.
- The licensing commission needs to make sure that the business complies with local legislation, as well as certain quality and safety standards. This also includes compliance with the AML, KYC, and responsible gaming policy requirements. The software used by the company is also tested.
- To make sure that the business does not go bankrupt in a couple of months, the licensing authority asks to provide a business plan, marketing strategy, and other documents forecasting development of the company.
- Assessment of the competence of the company owner and management, check of their criminal history and financial condition are also an important part of a Due Diligence procedure.
Since we are talking about obtaining a gambling license, one of the most crucial requirements to pass Due Diligence is AML compliance. Let’s talk about this in detail.
AML, KYC, and Customer Due Diligence
AML (Anti-Money Laundering) is a set of measures aimed at preventing money laundering. Unfortunately, the gambling industry is one of the most vulnerable and risky in this sense. Fraud and money laundering are common in the industry. Illegally obtained funds may be used for criminal purposes (for example, financing terrorism). To avoid such consequences, casino operators are required to comply with the principles of AML and KYC (Know Your Customer). The latter requires mandatory identification of players on the gambling platform.
Each gaming operator is required to create a set of measures to prevent money laundering. In particular, it should include mechanisms for detecting suspicious activities, analyzing them and reporting criminal incidents or attempts to commit them.
A good AML compliance program should include the Customer Due Diligence (CDD) procedure. This involves collecting basic information about the client (for example, name, address, and date of birth) and verifying it through a reliable source. Typically operators use databases of blacklisted or sanctioned individuals, or politically exposed persons.
If a high-risk client is identified, Enhanced Due Diligence (EDD) is also applied to him. This procedure is a more thorough check that includes the verification of the customer’s source of funds.
How to pass all checks and get a license?
All of the above can be intimidating for someone new to the gambling industry. However, we dare to assure you that it is possible to fulfill the requirements and pass all checks. What is needed to do so?
- Prepare a comprehensive AML compliance program. Introduce AML and KYC mechanisms of the gambling platform.
- Collect detailed and up-to-date information about the company, its owner and key persons and provide it to the licensing authority with .
- Provide the licensor with documents confirming that you have sufficient funds to conduct business. Prove the absence of debts.
- Draw up and show the regulator a business plan, marketing strategy, and risk assessment for the project.
Navigating the subtleties of getting a license and passing Due Diligence can be overwhelming. If you don’t want to waste time on this, feel free to contact professionals. The LicensingAid team is ready to help you cope with all the difficulties on the way to obtaining the long-awaited license.
Conclusion
If you are going to launch an iGaming project, you will certainly need a license. To obtain one you and your business have to pass Due Diligence check. Contact us to get more information or professional assistance in a license acquisition process. Our services include:
- AML compliance
- Bank or merchant account opening
- Trademark and design consultancy
- Help with preparation of required documents and communication with gambling regulators
Don’t hesitate to contact us and start your journey to growing a successful and profitable gambling business!
