The global gambling industry is constantly undergoing transformation driven by technological advancements and regulatory evolution. We look now to the vast Brazilian market, where preparations are being made to implement a comprehensive gambling regulatory framework.
This framework is designed to ensure fair play, consumer protection, and industry integrity. Central to this regulatory environment are stringent Know Your Customer (KYC) requirements.
A quick overview of the market
Brazil’s gambling market is one of the largest untapped markets globally. The country has a population exceeding 215 million people and a growing middle class with increasing disposable income. Historically, Brazil has had stringent restrictions on gambling, allowing only limited forms such as lotteries and horse racing.
However, recognising the potential economic benefits (notably, additional tax revenue) and the changing global landscape, the Brazilian government is poised to modernise its gambling regulations.
The new regulatory framework aims to create a controlled and responsible gambling environment that is expected to attract significant investment from both domestic and international gambling operators keen to tap into this burgeoning market. It focuses on licensing, consumer protection, taxation, anti-money laundering (AML) measures, advertising regulations, and technological standards, with KYC requirements being a cornerstone of these regulations.
The new regulatory framework
The Brazilian gambling regulatory framework will be both comprehensive and robust, and will be designed to ensure a fair and transparent gambling market. Here are some of the key framework components:
Licensing & oversight
As of the latest updates, Brazil’s regulatory framework for gambling is evolving, and the establishment of a dedicated regulatory body is anticipated with the upcoming regulations set to be implemented in 2025. While the name “National Gambling Authority” (Autoridade Nacional de Jogos, or ANJ) has been speculated in some discussions, the official name and structure of this regulatory body may still be subject to final governmental decisions.
The regulatory body will have a broad mandate, including the oversight of both online and offline gambling, implementation of KYC requirements and AML measures, and ensuring consumer protection and fair play within the industry. It will also be responsible for integrating advanced technological solutions such as the CPF database checks, biometric verification, and document analysis to enhance the integrity and security of the gambling market.
Consumer protection
Emphasising responsible gambling, the framework includes measures to protect consumers from gambling-related harm. This includes mandatory self-exclusion programs, limits on betting amounts, and resources for addressing problem gambling.
Taxation & revenue
A clear taxation system is expected to be outlined for gambling operators, thereby ensuring the industry contributes to public revenues (which in turn will support national social programs and public services).
Anti-money laundering measures
These will incorporate robust AML measures to prevent the misuse of gambling platforms for illicit financial activities, including detailed reporting requirements and transaction monitoring.
Advertising & marketing regulations
Strict guidelines will be implemented to prevent misleading or aggressive advertising practices and to protect vulnerable populations, particularly minors.
Technological standards
The regulators are expected to set forth technological standards to which operators must adhere to ensure the integrity and security of their platforms, including data protection and cybersecurity requirements.
KYC requirements brazilian operators
As South America’s most populous nation prepares to implement this new gambling regulatory framework, the focus on KYC requirements becomes paramount. These regulations are fundamental to ensure a secure, transparent, and responsible gambling environment.
Here are some of the KYC requirements that must be adhered to by all operators:
-Customer Identification Program (CIP)
-CPF database checks
-Biometric verification and re-verification
-Document analysis
-Enhanced due diligence (EDD)
-Ongoing monitoring
-Record-keeping
-Customer risk assessment
-AML measures
-Customer education and communication
CPF database checks
A unique aspect of the Brazilian regulatory framework is the mandatory use of the Cadastro de Pessoas Físicas (CPF) database for identity verification. The CPF is a unique taxpayer identification number given to Brazilian citizens and residents. It is managed by Serpro, a federal data processing service.
The CPF database plays a crucial role in the KYC process for gambling operators.
Through the integration of their systems with the CPF database, operators can verify the identity of their customers quickly and accurately. This integration ensures that the information provided by customers matches official records, thereby reducing the risk of fraud and identity theft.
Some of the benefits of CPF integration include:
Verification process
When a customer registers on a gambling platform, their CPF number is cross-checked against the Serpro database. This process verifies the authenticity of the CPF number and ensures that it matches the customer’s provided information, such as name and date of birth and/or biometric data.
Real-time validation
The integration with the CPF database allows for real-time validation of customer information, meaning that operators can instantly verify the identity of a customer during the registration process—thereby ensuring a seamless and efficient onboarding experience for the player.
Fraud prevention
By using the CPF database, operators can significantly reduce the risk of fraudulent activities. The database is highly secure and regularly updated, ensuring that operators have access to the most accurate and reliable information.
Compliance
Mandatory use of the CPF database makes certain that operators comply with the regulatory requirements set forth by the Brazilian government, which is crucial for maintaining the integrity of the gambling industry and protecting consumers.
Biometric verification
In addition to CPF database checks, the regulatory framework mandates the use of biometric verification for IDV. This includes the requirement for biometric verification of players every seven days to ensure continuous compliance and security.
Biometric verification involves using unique physical characteristics to verify an individual’s identity which enhances the accuracy and security of the KYC process, especially in conjunction with the Brazilian CPF database.
Some of the benefits of biometric verification include:
Enhanced security
Biometric verification provides a higher level of security compared to traditional methods. Unique biometric traits, particularly facial characteristics, are difficult to forge, making it a reliable method for verifying customer identities.
Continuous monitoring
The requirement for biometric verification every seven days ensures that the identity of the players is continuously monitored. This helps in preventing fraudulent activities and ensuring that the person engaging in gambling activities is the same individual who registered on the platform.
Seamless user experience
While enhancing security, biometric verification also offers a seamless user experience in which customers can easily verify or re-verify their identity using biometric methods.
Fraud detection
Biometric verification helps in detecting and preventing fraudulent activities by ensuring that the person accessing the gambling platform is the legitimate account holder. This reduces the risk of account takeovers, bonus abuse, and other fraudulent activities.
Document analysis
Document analysis is another critical component of the KYC requirements under the new regulatory framework. This involves affirming that the identification documents of the presenting user are real and live and present with the end user at time of verification.
Operators must verify the authenticity of identification documents provided by customers through a detailed authentication process—essential for verifying the identity of customers and ensuring compliance with regulatory requirements.
This process offers the following benefits:
Verification of authenticity
Document analysis helps in establishing the authenticity of the ID documents provided by customers and could include checking for security features such as holograms, watermarks, and other elements that indicate a genuine document.
Accuracy of information
Ensuring that the information on the identification documents matches the information provided by the customer is crucial for accurate identity verification and verifying details such as name, date of birth, and address.
Fraud prevention
Detailed document analysis allows operators to identify and prevent the use of forged or counterfeit documents, reducing the risk of fraud and ensuring that only legitimate individuals can access gambling platforms.
Compliance
Document analysis is a key requirement for compliance with the regulatory framework. Operators must ensure that their document analysis procedures meet the standards set forth by the Brazilian government.
Implementing KYC: challenges & solutions
While the importance of KYC is clear for this market, implementing these requirements can be challenging for gambling operators. Some of the key challenges include:
Technological infrastructure
Implementing effective KYC procedures requires robust technological infrastructure capable of handling large volumes of verification transactions and data and integrating with various verification sources. Operators must invest in advanced IT systems, and ensure they have the necessary technical expertise to manage these systems.
Data privacy & security
Protecting the personal information of customers is paramount. Operators must ensure that their data privacy and security measures comply with local and international standards and include implementing encryption, access controls, and regular security audits to protect sensitive customer data from breaches.
Customer experience
KYC procedures can be cumbersome and time-consuming, especially with those IDV providers with a manual processing element. Operators must therefore find a balance between compliance and providing a seamless experience for their customers.
Fully automating this onboarding journey and simplifying the KYC process by providing clear instructions and intuitive solutions will significantly help minimise any negative impact on the customer experience.
Regulatory compliance
As everyone well knows, staying up-to-date with regulatory requirements and ensuring ongoing compliance can be complex and resource-intensive. Operators need to establish dedicated compliance teams and invest in training and development to ensure that their staff remain knowledgeable about the current and changing regulatory requirements.
To address these challenges, operators can adopt numerous strategies:
Leveraging technology
Utilising advanced technologies such as GenAI can significantly streamline the KYC processes, making them even more scalable, efficient and accurate over manual processing.
Additionally, automated systems can seamlessly verify large amounts of documents, detect fraud anomalies, and flag high-risk customers. GenAI technology can also enhance ongoing monitoring by identifying unusual patterns and behaviours that may indicate potential fraudulent activities.
Partnerships with IDV providers
Collaborating with specialised IDV providers can enhance the accuracy and reliability of the operators KYC procedures. These providers have advanced GenAI and biometric verification tools that can expedite the onboarding process for the player and operator.
When they partner with a reputable global IDV provider, operators can leverage their expertise and resources to strengthen their own KYC processes for this market and beyond.
Customer education
Educating customers about the importance of KYC and the steps involved can improve their understanding and cooperation. Clear communication can also alleviate concerns about data privacy and security. Providing customers with easy-to-understand information about the KYC process and its benefits can help build trust and encourage compliance.
Continuous improvement
Operators should regularly review and update their KYC procedures to incorporate best practices and address emerging risks. This includes staying informed about changes in regulatory requirements, technological advancements, and continuous improvements ensures that KYC processes remain effective and efficient over time.
The future of gambling regulation in Brazil
The implementation of the new regulatory framework marks a significant milestone for the Brazilian gambling industry. Having a comprehensive and robust regulatory environment means that Brazil can position itself as a major player in the global gambling market.
The focus on KYC, including the mandatory use of CPF database checks, biometric verification, and document analysis, highlights the government’s commitment to ensuring the integrity and security of the industry. This also serves as a model of better regulatory standards, that require greater accountability by operators, for adoption by burgeoning gambling markets elsewhere in the Americas.
For gambling operators, adhering to the KYC requirements and leveraging advanced verification technologies will be crucial for success in the Brazilian market, while the challenges are significant, the potential rewards are substantial. By implementing effective KYC procedures today, operators can build trust with their customers, prevent fraudulent activities, and ensure compliance with regulatory standards.
The Brazilian gambling market will no doubt continue to evolve, and operators must remain vigilant and adaptable. Staying informed about regulatory changes, investing in advanced technologies, and continuously improving their KYC processes will be essential for maintaining a competitive edge. Prioritising customer protection and regulatory compliance today will permit operators to thrive in Brazil’s burgeoning gambling market, and contribute to a responsible and sustainable gambling environment.
Mark Knighton
Global Head of Gaming for IDVerse
Mark is a senior leader with over 25 years global leadership, business transformation and commercial growth experience to call upon. For over 13 of those years, Mark has been working across various sectors of the iGaming/gambling industry where he has been appointed to a number of CXO, senior leadership, and advisory board positions within numerous start-up and scale-up operators, European State Lotteries, as well as content and technical suppliers across regulated and emerging iGaming markets.
