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The sports betting industry is experiencing rapid growth, projected to exceed $140 billion worldwide by 2028, with a 10% annual growth rate. In Brazil alone, approximately 400 betting sites generated around 7 billion reais in 2021. These sites, operated from locations outside the country, have raised concerns due to their infrastructure and compliance with local regulations. This article explores the risks associated with invalid CPF registrations, highlights the regulatory landscape, and proposes a solution to enhance identity validation for bettors. 

The Regulatory Landscape and Compliance Challenges:  

Bookmakers typically establish their headquarters in countries where their operations are legally permitted, such as the United Kingdom and New Zealand. Meanwhile, online betting sites operating purely over the internet are authorized in Brazil under Law No. 13,756/2018, which categorizes them as fixed-quota lotteries.

While it is not prohibited for Brazilian citizens to use online betting sites, these platforms adhere to the laws of the countries in which they are headquartered, often raising concerns about compliance and identity validation processes. This ambiguity in regulation can create a perception of illegality, potentially harming the market. 

Risks for Bettors and Bookmakers:  

The absence of clear regulations in Brazil poses risks for both bettors and bookmakers. Although the prediction was that sports betting would be regulated in 2022, the process has been halted pending a decision from the new management. The future obligations for bookmakers are expected to include obtaining a license, establishing a local branch, fulfilling tax requirements, and implementing identity validation measures, such as validating the Individual Taxpayer Registration (CPF) to prevent fraud and restrict gambling for individuals under 18 years old. 

The Importance of Validating CPF:  

The CPF serves as the primary national identification document in Brazil. Caciporé Valente, CEO of Netrin, emphasizes the significance of companies strictly adhering to Brazilian tax legislation and implementing robust user identification processes to prevent risks associated with intruders and robots. However, there is a lack of clarity regarding the regulation of documents and identity verification measures for betting sites, further highlighting the importance of CPF validation as a critical step in confirming a user’s identity. 

Compliance with Money Laundering and Terrorism Financing Regulations:  

Apart from adhering to the regulations of their country of origin, betting companies must also comply with Brazilian legislation on the prevention of money laundering and financing of terrorism (PLD-FT). Law 9613, as amended by Law 12,683, establishes measures to prevent the use of the financial system for illicit activities and requires the creation of a risk classification and monitoring system. This system monitors suspicious transactions and requires periodic reporting to the Financial Activities Control Council (COAF). 

The Problem of Invalid CPF Registrations:  

According to a study conducted by Netrin specialists, approximately 10% of the consulted natural person records (CPFs) exhibited irregularities, such as registrations of minors, irregular status with the Federal Revenue, and records of deceased individuals. This poses a significant challenge for companies responsible for managing payments and deposits on sports betting sites, as well as ensuring compliance with KYC practices. 

A Solution: 

 Intelligent CPF Query API: Implementing an intelligent CPF query API offers a potential solution to the problem of invalid CPF registrations. By integrating this API, betting sites can automatically block registrations with invalid CPFs, ensuring the accuracy of bettor information during the registration process. This mechanism, primarily focused on Know Your Customer (KYC) practices, cross-references information to identify potential illegal transactions and enhances overall security measures.   

As the sports betting market continues to evolve, it is essential for both bettors and bookmakers to navigate the complexities of regulatory requirements and compliance. Invalid CPF registrations pose significant risks, but through the implementation of an intelligent CPF query API, betting sites can bolster their identity validation processes and protect the integrity of their platforms. 

One such solution that can address these challenges is the FACEKI KYC provider. With their advanced technology and comprehensive services, FACEKI offers CPF number verification in Brazil. By leveraging their robust API, bookmakers can seamlessly integrate the validation of CPF numbers during the registration process, ensuring that the provided CPF corresponds to the correct name and date of birth. This not only helps prevent identity fraud but also ensures compliance with local regulations and minimizes the risks associated with invalid registrations. 

Furthermore, FACEKI KYC solutions go beyond CPF verification. They also enable bookmakers to validate the status of the registration with the Federal Revenue and check for any presence on international restrictive lists, enhancing the prevention of money laundering (AML) practices. By partnering with FACEKI, betting sites can strengthen their Know Your Customer (KYC) practices, enhance security measures, and demonstrate a commitment to maintaining a safe and compliant gambling environment. 

In conclusion, by leveraging advanced technologies and reliable KYC solutions like the one provided by FACEKI, betting sites operating in Brazil can mitigate the risks associated with invalid CPF registrations. Through robust identity validation processes, adherence to regulatory frameworks, and strategic partnerships, the industry can thrive while maintaining trust and integrity.  

 To get started with FACEKI and book a demo with us today, click here.