When Joseph Martin started Kinectify in 2020, his company’s services weren’t always understood by the gaming industry.
Kinectify, a configurable AML platform that integrates data into a single view and workflow, had to educate operators about the company’s services.
“The industry is going through a modernization cycle right now that the banking industry really went through about 10-15 years ago,” Martin tells CDC Gaming. “I think that’s really important to frame this, that a lot of this modernization happens after enforcement actions, where you have these big AML enforcement actions, targeting and cybersecurity incidents that have happened across these big operators. Then, it’s a wake-up call where they look at their systems, they look at their processes and decide that it’s time to take that step and that investment.”
Martin has extensive experience in anti-money laundering, including a stint with Caesars as an AML investigator. Kinectify was launched with the idea the company would provide services that operators need but might not have the manpower to address.
“We really recognized that these legacy systems weren’t well adapted for AML expectations, and that there needed to be a modernization of how we systematically monitor and manage risk in the gaming industry,” Martin says.
Kinectify’s staff consists of AML professionals and technologists. The company’s board includes a former Microsoft executive and personnel with technology and venture capitalist backgrounds. Kinectify has backers from inside the gaming space.
The AML landscape has long been a concern of banks, money service and payment providers, money transmitters and any company classified as a financial institution. The Bank Secrecy Act of 1970 requires financial institutions to assist the government in detecting and preventing money laundering, tax evasion and other financial crimes.
“(Financial institutions) had a really big problem after 9/11 because they didn’t have these types of systems in place, and there was systematic movement of illicit funds through these organizations,” Martin says. “It’s really just a misusing of these services. It’s not that these organizations are inherently bad in facilitating this activity; it’s that they don’t have the right systems. If you’re moving trillions of dollars as a global financial institution, you can’t monitor that activity without appropriate systems in place.”
The gaming industry also is classified as a financial institution under the Bank Secrecy Act, and they are expected to operate at this level. But again, they lack access to necessary tools.
“They’re supposed to operate at the rigor of a bank, without the tools of a bank,” Martin says of gaming operators. “One of the reasons why it’s a very small industry, it’s very insular. It’s very highly regulated space. If you only have hundreds of operators to sell to in the banking world, you have big SaaS companies, the core technology providers of the banking space, trying to make AML tools, but it’s too highly specialized.”
Third-party companies that serve financial institutions frequently have to rebuild their technology to service the gaming industry, which is not cost-effective. Into this void steps Kinectify and its tools geared to serve gaming operators.
Martin said Kinectify serves only a small portion of the gaming industry but is growing quickly. But those using Kinectify have witnessed results, with more $2.3 billion in suspicious activities uncovered.
“This is a multi-billion dollar issue, and now the casinos have access to that tooling to be able to mitigate and manage that risk,” Martin says. “That’s where we were seeing the regulators getting more concerned and the federal government getting more concerned, because this transition needs to happen, and it needs to happen now.”
One might expect smaller operations to be more vulnerable than larger operations, but Martin says that the risk is spread throughout the industry. In AML, the size of the operator doesn’t matter.
“It doesn’t matter your size – you are expected to abide by the Bank Secrecy Act,” he says. “If you think about risk and the way it flows through an organization, this is not really a labor problem. I think that’s a misconception, that we can fix this by throwing bodies at it, and we’ll just hire some people, and they’re going to operate primarily off of spreadsheets for a small casino and this is a human labor problem.
“It’s really not. It’s a systems problem. The scale of even a small casino really breaks labor. The reason I say that is one of the core tenets of anti-money laundering law and regulation is you run a risk-based program, so you have to identify who’s high risk, and then you’re expected to manage that risk.
“To be able to do that, you have to assess risk for everyone. Who are my high-risk people? And if you think of a smaller casino, let’s say they have 100,000 players, and let’s say there’s about 17 or so risk factors that would go into a risk calculation. That would be 17 calculations for every player. You’re talking about 1.7 million calculations that would have to be done, and risk changes daily.”
