One of the most important due diligence principles for assuring compliance with the AMLA is the KYC (“Know Your Customer”) principle. The first step is to identify the person with whom the financial intermediary intends to start (or holds) a business relationship. In some cases, even for single transactions, the financial intermediary must identify his business partner. Identity verifications obligations are provided for by Article 3 of the AMLA and, for lottery and sports betting operators, they are specified in Article 3 and Article 4 of the OAML-FDJP.
The Swiss legislator decided to distinguish offline games from online games, so the due diligence requirements for identity verification of players are slightly different. The procedures for verifying identity, which are specified by Article 6 and Article 7 of the OAML-FDJP, remain the same for both online and offline players.
Methods for verifying identity
There are different ways of verifying the identity of a player:
- In-person identification. This occurs e.g. when a player comes personally to the offices of the operator to claim winnings. The player’s identity can be verified by consulting the original, or a certified copy of, an official identity document in plain text bearing a photograph, such as a passport, identity card or driving licence. The operator keeps a copy of the identification document (front and back side) or the certified copy. Additionally, the person who carried out the identification for the operator must sign, and date the verification, and include a remark confirming that he/she has seen the original. This proof of verification is then stored by the operator electronically or in paper form.
- Video identification. Identification is made via a real-time (i.e. live) audio-visual communication between the player and the operator. This kind of identification requires the implementation of significant technical and security measures. Technical constraints can for the most part, be overcome by offering this type of identification via a certified video identification provider.
- Online identification. Player access to an online tool is made available by the operator and follows various steps for identification, which includes taking photos of the players (biometric identification) and of their personal identity documents. As with video identification, online identification requires significant technical and security implementation measures. The alternative is to make this service available via a certified provider of online identification.
- Trusted privately managed database. Another way to identify the player is to consult and record in electronic form an electronic extract of the database of a trusted privately managed database company. Although this is a valid option for verifying the identity of a player, the fact that information about the player may be missing on this database or that there may be discrepancies with evidence collected by the operator mean that an alternative identity verification method (amongst those described in this section) is preferable.
- Proof of a Swiss bank account. Instead of identifying the player by one of the aforementioned methods, the operator can consult and store electronically or in paper form the copy of a document certifying that the player holds a personal Swiss bank account. The player can provide the operator with this document either physically (in person or by post) or electronically (a simple e-mail is sufficient). Where this method is chosen, Swiss operators ask players for a simple copy of their identity document as additional evidence. This double document identification is therefore equivalent to in-person identification.
Whichever method is chosen for identity verification, the minimum information required for the operator to register in its system is the player’s first name, surname, date of birth, nationality and full residential address.
Responsibility for identity verification as part of AML due diligence lies with the lottery and sports betting operator. It cannot be delegated to the operator’s retailers (point of sales), who will never be required to identify players for and on behalf of the operators.
Identity verification for large-scale offline games
The identity of a player who plays offline (in the field, at one or more points of sale), must only be verified when the player wins a certain amount of money for a set type of game. The threshold for verifying the identity of the player depends on the amount of the winnings (gross amount) and the type of game played.
For the sake of clarity, the following table shows the thresholds applicable for the various games. In the case of winnings exceeding the indicated amount, the identity of the player must be verified before any payout, meaning that the player will receive their money only after having been identified.
Under certain conditions, the threshold is CHF 25,000, such as for games that are not electronic lottery tickets, scratch tickets or sports betting and where the payout rate is less than 70% (e.g. EuroMillions).
Once the identity of the player has been verified, the player should be screened for their PEP status as required by Article 15(2) of the OAML-FDJP and according to definitions of PEPs in Article 2a of the AMLA. PEPs are politically exposed persons who exercise an important public function and who, because of their predominant function, generally present a higher risk of corruption because of their position and the influence they can exert (even family members of the PEP or close associates have to be treated as PEPs). If the player is a PEP, he/she may be subject to enhanced due diligence as outlined in Chapter 5. Otherwise, the winnings can be paid.
In the event of another win that also exceeds one of the thresholds needing identity verification, players whose identities have already been identified do not need to have their identity verified again.
With the entry into force of the amended AMLA on 1 January 2023, financial intermediaries such as lottery and sports betting operators are obliged to periodically check if the required AML records of their clients (for operators, clients are referred to as players) are up to date, and update them if necessary. Following the risk approach upheld in law2, Swiss operators are free to determine when and in what situations they verify again the identity of a player who has been correctly identified in the past.
Identity verification for large-scale online games
Unlike offline games, online games are characterized by a lasting business relationship between the player and the operator, as the players will have their personal online account for making deposits used to make wagers. Players are therefore known from the beginning, even if their identities have not yet been formally verified from an AML point of view.
The thresholds above which verification of the identity of players becomes compulsory are therefore different from those applicable to offline games, and include not only winnings, but also deposits and withdrawals of money from players’ online accounts. Since the business relationship is continuous, thresholds are not calculated on a single operation, such as a single win, but are aggregated over a period of time, which is 30 days for thresholds applicable to the identity verification obligation.
For the sake of clarity, the following table shows the thresholds applicable to all online games.
- In the case of account deposits, the identity of the player must be verified when CHF 15,000 or more are deposited in the player’s online account in a period of 30 days or less.
- In the case of winnings, the applicable threshold differs with regards to the percentage of wagers that the player allocates to games with a payout ratio of 70% or more. Only winnings directly credited3 to the player’s bank account and withdrawals ordered by the player are considered in the total calculation applicable to these thresholds. Small winnings that remain in the player’s online account are not included in the total amount of winnings. This means, for example, that a player who, in a period of 30 days, wagers a total of CHF 5,000 on horses and a total of CHF 15,000 on online draw games (assuming that the payout ratio for horse betting is >70%, and <70% for draw games) and wins a total of CHF 24,000 will not have to have their identity verified (because in this case, the threshold is CHF 25,000). The same player betting a total of CHF 5,000 on horses and a total of CHF 5,000 on online draw games and winning a total of CHF 11,000 will have to have their identity verified by the operator (because here the threshold is CHF 10,000). This is due to the risk approach, the important principle followed by the AML legislation.
- Players closing their online accounts containing CHF 5,000 or more must have their identity verified.
- When at least CHF 5,000 are transferred from the player’s online account to the player’s bank account and this amount does not come from winnings, the player’s identity will be verified.
As is the case for offline games, in online games a PEP screening must be carried out on players once their identity is verified. This is required by Article 16(2) of the OAML-FDJP. If the PEP status of the player is confirmed, this could lead to the business relationship being subjected to enhanced due diligence measures, which are presented later in Chapter 5.
PEP checks are typically performed by operators through external KYC solution suppliers, whose due diligence screening tools usually include modules for checking whether an individual or corporation has been convicted of particular crimes, is subject to international sanctions, or is associated with negative news from blogs, websites, social media, television, radio, etc. Thus, when performing PEP checks, operators are screening players for a wider range of AML risks, which could, for example, make it possible to detect that the player claiming a winning scratch ticket (and requiring identity verification) has criminal record for supporting a criminal organization.
2 The AMLA states in Article 7(1bis) that “the periodicity, scope and type of checking and updating are based on the risk posed by the customer”.
3 Article 21 of the OAML-FDJP requires that winnings from online games exceeding CHF 1,000 must be directly credited to the player’s bank account, without transiting through the player’s online account.