How to Prevent iGaming Fraud: Its Types, Consequences & Methods

The specter of fraud looms large in iGaming, posing a multifaceted challenge for operators and players alike.

For operators, fraud can lead to financial chargebacks, reputational damage, player trust erosion, regulatory penalties, increased expenses, and potential blacklisting by payment processors. Legal issues may also arise if fraud is not adequately addressed.

On the other hand, players suffer from compromised account security, financial losses, and payment fraud. Activities like collusion, chip dumping, and gnoming undermine trust in the game’s fairness and security, causing frustration and dissatisfaction with operators’ efforts to combat fraud.

Our guide tackles these challenges head-on, offering strategic insights to detect and prevent harmful iGaming fraud attacks. SEON equips operators with essential knowledge and tools to protect their platforms and players, ensuring a secure, fair and enjoyable gaming environment.

What is iGaming Fraud?

iGaming fraud includes any kind of fraudulent attack against iGaming operators, online casinos, and online betting shops. Because of the nature of iGaming businesses, fraudsters have very specific methods of trying to abuse systems, cheat at games, and exploit loopholes. 

While some of these iGaming attacks fall within grey areas, others are absolutely considered fraudulent, for instance: creating multiple accounts under different names, using stolen IDs to bypass KYC checks, and using spoofing technology to evade IP blocks.

Understanding the Scope of iGaming Fraud

Fraud in iGaming deeply impacts players, operators and the industry’s integrity and compromises the digital gaming space’s security and trust. Despite the implementation of advanced security measures, the dynamic and complex nature of iGaming fraud demands continuous innovation in fraud detection and prevention strategies, safeguarding the interests of legitimate players and operators.

Types of iGaming Fraud

• Multi-Accounting: This is a practice where an individual creates multiple accounts on a single platform. While the user may employ different personal details or identities to set up these accounts, they are all controlled by one person to exploit sign-up bonuses and other promotional offers and to manipulate game outcomes. Multi-accounting is often against the terms of service of most platforms, as it can yield unfair advantages and create greater financial losses for the service providers.
• Gnoming: A subtype of multi-accounting, gnoming is where a user creates several accounts pretending they belong to different players. These accounts could be in the names of friends, family, or entirely fictitious individuals and are made primarily to abuse promotions or manipulate betting outcomes. Gnoming complicates the tracking and enforcement against such practices because the approach is designed to appear as if unique and separate individuals operate the accounts.
• Bonus Abuse: This fraud occurs when users exploit a platform’s promotional offers in ways the provider does not intend. For example, an individual might repeatedly sign up for new accounts to take advantage of welcome bonuses or other promotional deals for new users. This type of fraud undermines the promotional strategies of a platform, inhibiting operators from understanding the true impact of a marketing campaign or understanding new user growth and can result in significant financial losses, skewing the intended user experience and competition balance.

Consequences of iGaming Fraud

By understanding these consequences of fraud – and their ripple effects across different facets of the industry – stakeholders can better appreciate the importance of robust fraud prevention.

Financial Repercussions for Operators

iGaming fraud impacts operators’ revenue numbers and profitability, potentially costing millions of dollars in direct losses and long-term reputational and operational damage. Research shows up to 15% of online gaming’s gross revenue is lost to promo abuse and fraud. For chargebacks and penalties, for every $100 in chargebacks, an operator pays $207 when factoring in processing costs, chargeback penalty fees and the refunded transaction; this means that for a large operator suffering $1 million in chargebacks, the total cost can reach or exceed $2.07 million.

Add to that the Federal Trade Commission’s estimate that fraud in the gaming sector is growing 30% year-over-year and that $2.07 million quickly jumps to $3.5 million the following year. To stop such losses, operators need an exponentially scalable solution to keep up with the increasing volume and velocities of fraud attempts. The financial strain can also be compounded by losing legitimate players who may leave the platform due to concerns over fairness and security, deterring profitability and company growth.

Damage to Reputation & Player Trust

An operator’s reputation is its lifeline. Public incidents of fraud can severely damage an operator’s reputation, leading to diminished player trust, reduced engagement, challenges in acquiring new users and difficulties in retaining a loyal customer base. In today’s digital age, the news of fraud can spread swiftly, exacerbating damage and impeding an operator’s ability to recover and thrive.

Regulatory & Legal Implications

As a highly regulated industry, operators must adhere to strict standards to maintain their licenses. iGaming fraud can attract regulatory penalties and legal challenges and even revoke operating licenses. For example, see the probe into Malta-based Apollo Entertainment group, which was cited for failing to intervene with players who were experiencing gambling-related harms. To stay in business, operators must demonstrate robust mechanisms to prevent and detect fraud, and failure to do so can lead to significant legal and financial consequences.

Another illustrative instance is a notable case in March of 2023 when the UK Gambling Commission levied a historic $23.81 million fine against an operator for substantial social responsibility and anti-money laundering lapses. This fine, the largest ever by the Commission, underscores the crucial need for operators to establish and maintain effective fraud prevention and detection systems to avoid dire legal and financial repercussions while ensuring consumer protection and industry integrity.

Impact on Player Experience & Platform Integrity

When fraud infiltrates an iGaming environment, it doesn’t merely disrupt operational metrics; it directly impairs the player’s experience. Fraudulent activities can skew the fairness of games, compromise the security of player accounts, and diminish players’ overall enjoyment and trust in the platform.

Exploitation Techniques Employed by Fraudsters

Fraudsters employ many techniques to exploit operators’ platforms to profit illegally and are adept at evading current detection systems. For example, fraudsters mask their online activities by utilizing modern tools like VPNs, Tor or incognito browsers to make detection challenging across the entire player journey, from account creation to deposits, gameplay and withdrawals. Combined with these tools, fraudsters often use sophisticated software to automate account creation and gameplay, deploy scripts for automated betting and deploy collusion tactics with multiple accounts to manipulate game outcomes or take advantage of bonus structures.

Moreover, the advent of artificial intelligence (AI) and machine learning (ML) has exacerbated the use of synthetic identity fraud, leveraging stolen personally identifiable information (PII) in tandem with credit card data, exploiting payment system vulnerabilities to fund their accounts, increasing the risk of chargeback fraud. These comprehensive and advanced strategies require equally sophisticated countermeasures from operators, who must continuously adapt fraud prevention tactics to safeguard their platforms and maintain a secure and fair gaming environment.

Multi-Accounting in Depth

While not inherently fraudulent, deliberate multi-accounting to exploit or abuse a system crosses into unethical territory. At its simplest, it involves a user creating multiple accounts from the same device or IP address. At its most complex, the behavior can escalate to more sophisticated methods, where organized fraudsters employ emulators, virtual machines and advanced proxy services to generate seemingly legitimate user profiles, rendering financial losses, skewed platform data and other adverse outcomes for operators.

How to Prevent Multi-Accounting

Preventing multi-accounting requires a balanced approach that doesn’t overly complicate the user experience while effectively detecting and mitigating fraudulent activities. Here are critical strategies for preventing multi-accounting:

• Device Intelligence: A cutting-edge anti-fraud approach, device intelligence analyzes thousands of real-time data points to detect and prevent fraud, including scrutinizing hardware and software configurations across desktop and mobile devices and user behaviors to uncover patterns indicative of fraudulent activities. Device intelligence also enables the continuous monitoring and dynamic analysis of data points to safeguard online transactions and interactions.
• Digital Footprinting: Digital footprinting involves collecting and analyzing information generated by an individual’s online presence and activities, utilizing real-time data and a broad spectrum of social and digital signals. This layer of fraud prevention puts together a social profile by using data already collected during onboarding processes, like a phone number and email address. It can enhance the validation of customer details, allowing for more effective and efficient differentiation between legitimate and fraudulent transactions.
• IP Analysis: Beyond simple IP checks, this includes geolocation and involves monitoring for using VPNs, Tor networks and other means of obfuscating user location, which are common in multi-accounting schemes.
• Email Analysis: Leveraging data enrichment, operators can scrutinize email address details, such as domain validity, creation date and connections to social media profiles, to gauge the legitimacy of user accounts. Ninety-two percent of fraudsters use an email address that has never been involved in a data breach, with another 87% utilizing free email providers. 
• Phone Number Analysis: Examining the carrier type, country of origin, and associated social media presence offers further insights into the authenticity of each account.

These strategies should be part of an integrated system that combines AI-driven analytics with human oversight to sift through vast amounts of data and pinpoint potential multi-accounting behavior. By implementing a multi-faceted approach, operators can detect and address multi-accounting efficiently, protecting their platforms from abuse while maintaining a smooth and secure user experience.

Tackling Gnoming

Gnoming accounts often masquerade as belonging to friends or fictional characters and contribute to manipulating iGaming outcomes. Addressing gnoming is crucial for maintaining the fairness and integrity of games and ensuring a level playing field for all players.

Preventative Measures & Best Practices for Gnoming

• Enhanced User Verification: Implementing rigorous verification processes at the account creation stage can help identify and prevent gnoming. This includes verifying unique user details and conducting background checks to ensure the authenticity of new accounts.
• Dynamic Friction: Apply dynamic friction measures, where additional verification is requested only for suspicious users. This approach minimizes inconvenience for legitimate users while scrutinizing those with potential gnoming indicators.
• Real-Time Data Analysis: Gathering comprehensive user information during account registration and analyzing this data can reveal connections between accounts, helping to detect and prevent gnoming practices.
• Custom Risk Rules: Develop specific risk rules to detect patterns and behaviors typical of gnoming, such as shared device or browser data, similar betting patterns, similar password hashes or irregular account activity. These rules can help identify potential gnoming activities early in the user journey.
• Continuous Monitoring: Regularly monitor and review account activities to identify unusual patterns like multiple accounts cashing out to the same beneficiary account number or other inconsistencies that may suggest gnoming. Early detection can prevent potential abuse and maintain the integrity of the platform.
• Education and Communication: Inform users about the risks and consequences of gnoming through clear communication and educational materials, including terms of service. Establishing a well-informed user base can deter individuals from attempting such fraudulent activities.

Combatting Bonus Abuse

Promo and bonus abuse perseveres as a significant issue, plaguing operators in high-risk sectors like online betting and gambling. Through deceptive practices, users compromise the platform’s financial stability and the state of fair gameplay.

Strategies to Detect & Prevent Bonus Abuse:

By implementing multi-layered strategies, operators can create a robust defense against promo abuse, protecting their platforms from financial loss, preserve the integrity of their offerings, and ensure a fair and enjoyable experience for all users:

1. More Complex Promotional Offers: Implementing intricate promotion offers with strict withdrawal conditions can aid in mitigating bonus abuse. Introducing rollover requirements ensures that bonuses must be wagered multiple times before withdrawal, reducing the feasibility of exploitation. However, balancing these rules is crucial to avoid deterring genuine users.

2. Digital Identity Profiling: Using tools for advanced digital identity profiling, including email analysis, IP analysis, device intelligence, digital footprinting, and even password hash monitoring, informs a comprehensive approach to identify and flag potential abusers and suspicious activities before registration is complete on the platform.

3. Continuous Monitoring: Continuous monitoring of user activities is employed to detect irregular patterns or anomalies that may indicate promo abuse. This can include tracking the frequency and nature of bonus claims and withdrawals and monitoring betting patterns indicative of abuse.

4. Delayed Customer Friction: While traditional ID verification plays a role, supplementing it with additional checks via delayed customer friction enables operators to leverage hard KYC checks when appropriate, as required by a user’s digital behavior. This refined process enables a holistic view of each player’s legitimacy and allows for more granular control of KYC processes, introducing check times as appropriate and necessary.

5. Use of AI and Machine Learning: AI and ML algorithms can analyze vast datasets and identify patterns of abuse. These technologies can adapt and evolve rapidly, detecting new tactics fraudsters employ to ensure that prevention and detection strategies remain effective.

6. Collaboration and Sharing: Engage in industry collaboration to share insights and strategies for combating promo abuse. Learning from the collective experience can help devise more effective methods to deter and detect abusive behaviors and report to governing bodies to forge cohesive and insightful regulations.

Balancing User Experience with Fraud Prevention

Achieving a balance between user experience and fraud prevention is crucial. SEON’s solutions are designed to maximize user convenience while maintaining rigorous security standards. By implementing intelligent, risk-based verification processes, iGaming platforms can provide a seamless experience for genuine users while deterring and detecting fraudulent activities.

Setting a Continuous Improvement Cycle Against iGaming Fraud

Adopting a continuous improvement cycle is vital in the changing landscape of iGaming fraud. This involves regularly monitoring, analyzing, and refining fraud prevention strategies based on the latest data and emerging trends. By staying proactive and responsive to new threats, operators can maintain a robust defense against fraud, ensuring their platforms’ ongoing integrity and success.

SEON’s Fraud & Money Laundering Prevention

SEON delivers a competitive edge in fraud prevention and risk mitigation by leveraging real-time AI-driven insights from its rules-based machine learning engine to empower operators to spot and prevent key fraud vectors – without impacting the player experience.

Crafted to uncover connections indicative of multi-accounting, gnoming and promo abuse, SEON enables operators to utilize insights from users’ digital footprints combined with behavioral patterns and device intelligence to thwart suspicious accounts.

Whether stemming from opportunistic customers or sophisticated fraud rings, SEON runs device fingerprinting, IP and email and phone lookups, and taps other signals to extract as much metadata as possible about the person signing up for bonus and incentive programs. All gathered data undergoes rigorous analysis and is fed through a customizable risk-scoring engine designed to deliver actionable insights to keep operators ahead of the game. Real-time monitoring for PEPs and sanctions enables operators to maintain compliance with laws and regulations while keeping customer insights all in one platform.

Sources:

• iGaming Operators vs. Fraud: the Stakes Have Never Been Higher
• 2024 Chargeback Fees – The True Cost of Your Chargebacks
• New FTC Data Show Consumers Reported Losing Nearly $8.8 Billion to Scams in 2022
• Evolution hit with class action lawsuit for alleged securities fraud
• Ontario iGaming Operator Slapped With Fine for Responsible Gambling Shortcomings
• William Hill fined record $23.7M for social responsibility, AML failures