Online gambling has transformed gaming, offering unmatched convenience. Players can enjoy games from home or on the go, fueling a booming industry projected to grow from $95.1 billion in 2023 to $131.9 billion by 2027. However, this surge in online transactions has also attracted scammers eager to exploit vulnerabilities.
Fraud in online gambling goes beyond individual losses; it enables money laundering and threatens the financial system. This article explores common fraud tactics and highlights the importance of proactive detection strategies to protect platforms, maintain fairness, and ensure a secure experience for all players.
What Is Online Gambling Fraud?
Online gambling fraud refers to any unlawful or unethical practice aimed at exploiting online gambling platforms to extract funds, bonuses, or other benefits—or to facilitate other forms of fraud such as money laundering. These schemes are carried out by both amateur and professional fraudsters targeting the vulnerabilities of gambling operators.
This type of fraud can take many forms, including multi-accounting to abuse bonuses, affiliate fraud, arbitrage, and money laundering. Due to the accessibility of online gambling and its historical association with financial crimes, the industry is especially susceptible to fraud. This vulnerability has drawn the attention of regulators, making it critical for poker rooms, online casinos, slot websites, bingo rooms, and bookmakers to adopt robust fraud detection measures.
Common Types of Online Gambling Fraud
Fraudsters continually devise creative ways to exploit online gambling platforms, but these seven types of fraud are among the most prevalent:
- Multi-accounting: The foundation of many gambling fraud schemes. Fraudsters create dozens or even hundreds of accounts using fake credentials to manipulate outcomes. These accounts often serve as tools for further schemes, such as:
- Bonus abuse: Exploiting sign-up bonuses, coupons, and promotions through fake accounts, potentially driving your platform into a loss.
- Gnoming: Using multiple accounts to deliberately lose in head-to-head games, funneling wins and bonuses to one favored account. This tactic is common in poker.
- Chip dumping: Similar to gnoming but focused on poker tables, where multiple accounts join the same table to manipulate results in favor of a specific player.
- Payment fraud: Since gambling platforms process deposits and withdrawals, they are vulnerable to various payment-related attacks:
- Carding: Using stolen card information to top up accounts, enabling fraudsters to turn illegitimate money into real wins.
- Chargebacks: When stolen credit cards are used on your platform, legitimate cardholders often request chargebacks, leaving the gambling operator to cover the losses and incur processing fees.
- Phone top-up abuse: Fraudsters use phishing and social engineering to trick victims into funding their gambling accounts through phone payment systems, stealing money directly from unsuspecting users.
- Money laundering: Just as in physical casinos, online platforms processing large sums of money can attract criminals seeking to legitimize illicit funds. Gambling operators must remain vigilant to avoid being exploited as conduits for financial crimes.
How Does Fraud Affect an Online Gambling Site?
Fraud has a serious impact on online gambling sites, affecting both operations and reputation:
- Revenue Loss: Fraud leads to costly chargebacks, lost bonuses, and time spent managing fraudulent activity.
- Processor Issues: High chargeback rates can harm relationships with payment processors, risking bans that limit deposit options for players.
- Resource Strain: Combating fraud drains time, money, and effort, impacting overall efficiency.
- Customer Support Overload: Fraud increases complaints and overwhelms support teams with excessive requests.
- Compliance Risks: Regulatory scrutiny is high. Missing fraud or self-excluded players can result in fines or legal trouble.
- Customer Dissatisfaction: Poor fraud management frustrates players, driving them to competitors.
In multiplayer games like online poker, unchecked fraud can cause active player numbers to drop rapidly, damaging the site’s appeal and profitability.
How to Stop Online Gambling Fraud
A crucial strategy to prevent fraud for any online business is adhering to robust KYC (Know Your Customer) practices. This involves using risk-based fraud detection software that not only complies wTo ensure compliance and combat online gambling fraud effectively, operators must adopt a proactive, multi-layered approach. This starts with robust Know Your Customer (KYC) practices and tailored fraud detection solutions designed for the gambling sector.
Key steps to implement from onboarding onwards:
- Verify user identity with government-issued IDs and perform age checks, as required by local regulations.
- Conduct AML checks, including screening for politically exposed persons (PEPs), sanctions lists, and crime databases.
Fraud detection methods during signup:
- Device fingerprinting helps detect collusive activities like bonus abuse or chip dumping by identifying multiple accounts linked to the same device.
- Password hash analysis flags accounts using similar credentials, often indicative of scaled multi-accounting.
- Digital footprint analysis examines indicators like email age, VPN usage, and the presence (or absence) of social profiles to identify suspicious accounts.
- IP fraud scoring reveals potential fraud by analyzing internet activity, location, and shared usage patterns.
- Behavior and velocity checks monitor actions across touchpoints to flag anomalies, such as multiple logins from the same IP within hours.
These measures should also extend to critical touchpoints like deposits, withdrawals, and account access to detect and prevent account takeovers or the use of stolen credentials. Monitoring card information during top-ups is equally crucial to stop fraudulent transactions involving stolen or high-risk cards.
What Tools Do You Need?
If you want to fight against online gambling scams, you should know that cross-referencing huge amounts of data is humanly impossible, which is why fraud managers will need to turn to third-party solutions.
These will include tools, functionality, and touchpoints such as the following – though keep in mind these can be combined into end-to-end and other types of software:
- ID verification
- PEP (politically exposed persons) lists
- Anti-money laundering (AML) tools
- Sign-up (onboarding) monitoring
- Log-in monitoring
- Withdrawal and deposit monitoring
- Actual games and table monitoring
How SEON Prevents Online Gambling Fraud
SEON’s seamless, robust protection and expertise in real-money gaming uniquely position it to help gambling operators grow without sacrificing safety. Insights from iGaming fraud data inform both best practices for using SEON’s tools and ongoing software improvements.
SEON offers a fully customizable, explainable, and transparent solution that, despite its potential for full automation, investigates each customer by analyzing their online footprint from 90+ reliable sources. This powerful tool is invaluable for detecting bot-like behavior in new users.
By utilizing anonymized identifiers like device fingerprints and password hashes to detect multi-accounting, collusive play, and bonus abuse. Its granular tools are effective against fraud rings, bots, money launderers, and affiliate fraud, while also supporting AML and KYC mandates by flagging obvious fraudsters early, helping operators streamline onboarding and cut costs.
SEON is more than just a software solution; we’re your partner in reducing gambling fraud scams. We can assist you with setting up an anti-fraud solution that is tailor-made for your specific needs and will not cost you legitimate players.
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Frequently Asked Questions
Since gambling operators are categorized as high-risk, a high chargeback rate will ultimately impact an operator’s overall revenue and damage their ability to accept credit card payments. Issuing banks might even blacklist you, not letting you pay using Visa or Mastercard, for instance.
Numerous instances of gambling fraud have led to huge fines and even jail time. For instance, in June 2021, a nun in America was sentenced for embezzling more than $835,000 from a school to pay for personal expenses, which included gambling trips.
Identity theft fraud is one of the biggest issues with online gambling fraud since fraudsters look to use stolen identities for bonus abuse, open new accounts, and ultimately launder money.
Check if you have any unauthorized transactions on your bank statement. In addition, look at your recent gambling history for any behavior you don’t recognize, which could mean that someone might have gained access to your account. An unexpected increase in communication from your chosen operator can be yet another signifier.
You might also be interested in reading about:
- SEON: iGaming Fraud: Its Types, Consequences & Prevention
- SEON: Stop Multi-Accounting Fraud
- SEON: Best Fraud Detection Software
Learn more about:
Browser Fingerprinting | Device Fingerprinting | Digital Footprinting | Fraud Detection with Machine Learning & AI
