Online Gambling Fraud: How It Works & How to Prevent It

Learn about the basics of online gambling fraud, how it affects businesses, and how to protect yourself with the latest solutions.

What Is Online Gambling Fraud?

Online gambling fraud sees cybercriminals looking to abuse or defraud a gaming operator. This takes a wide variety of forms, from multi-accounting to abuse bonuses, affiliate fraud, money laundering – and even grey areas such as arbitrage.

In the context of fraud detection and prevention, online gambling fraud refers to every and any unlawful or detrimental practice or scheme carried out by professional or amateur fraudsters in order to extract funds, bonuses, or other benefits from the online gambling company – and/or facilitate other fraud.

Online gambling is particularly vulnerable to fraud due to its accessibility and the traditional association of the gambling industry with money laundering. This susceptibility draws attention from regulators and legislators, no matter if we’re talking about poker rooms, online casinos, slot websites, bingo rooms or bookmakers.

Most Common Types of Online Gambling Scams

While fraudsters tirelessly come up with new creative ways to exploit the system, there are a number of common attacks to watch out for.

Multi-accounting: The cornerstone upon which many gambling attacks are built. Fraudsters create dozens, even hundreds, of accounts using fake credentials in order to tilt the balance in their favor online. These are used to facilitate schemes such as the following:
Bonus abuse: The numerous fake accounts benefit from new signup bonuses, coupons and other attractive offers. While these promos are an excellent way to attract new players, they can quickly make your platform run at a loss if you hand out too many of them.

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Gnoming: Using multiple accounts to help one player win. The other accounts are used to lose deliberately in head-to-head games so one can pocket all the wins and bonuses that go with it. This is common in poker, for example.
Chip dumping: Another fraudulent practice at the poker table. Like with gnoming, the idea is to make multiple accounts join the same table in order to cheat the system and influence the results in favor or against one particular player.

Then, there are the payment attacks. Since they require deposits and withdrawals before you can play, online casinos and gambling platforms are essentially digital wallets – therefore, processing payments also comes with the potential for losses there.

Carding: Fraudsters can use stolen card information to top up their account, which means using illegitimate money to pocket real wins.
Chargebacks: After someone has already used a stolen credit card on your platform, the legitimate cardholder will likely realize what happened and request a chargeback from their banking or credit card provider. Unfortunately, this means they will need to get refunded at the gambling operator’s expense, as well as incur some processing charges.
Phone top-up abuse: If your online casino offers phone top-up, fraudsters can trick victims into funding their accounts for them. This relies on standard social engineering and phishing methods to target unsuspecting users and ask them to make a phone payment. The payment goes directly into the fraudster’s gaming account.

Finally, like with brick-and-mortar casinos, owners have to make sure they do not become a place of choice for money launderers. Any place that processes large amounts of money can be used to make illegally obtained cash legitimate, and gambling institutions are a choice destination for criminals.

process to prevent online gambling fraud

How Does Fraud Affect an Online Gambling Site?

Fraud has a significant negative impact on online gambling sites, with consequences that are common across online businesses:

Loss of revenue: Fraud can be costly due to chargebacks, lost bonuses, and the time spent dealing with fraudulent players.
Bad reputation with payment processors: Online gambling sites are considered high-risk by payment processors. Poor control over chargeback rates can lead to being banned from their networks, severely impacting the ability of players to make deposits.
Waste of resources: The time and effort spent combating fraud and refining processes to mitigate risk are substantial, extending beyond just monetary losses.
Overwhelmed customer support: Fraud complicates business operations and increases customer complaints, overwhelming support teams with excessive requests.
Compliance issues: Regulators are intensifying scrutiny on online gambling. Failure to detect fraud or self-excluded players can result in severe fines and legal issues.
Reduced customer satisfaction: Inadequate fraud management can diminish customer satisfaction, potentially driving players to competitors.

The last point is particularly important when it comes to multiplayer games: online gambling sites that offer games such as online poker will quickly see their live number of users go down if they fail to control fraud at the tables.

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 with KYC regulations but also tackles specific risks in the online gambling sector. SEON’s recent analysis of iGaming fraud stats provides insight into the prevalent types of fraud affecting operators and the security measures effective in mitigating these risks.

In order to be compliant and fight fraud, implement these steps from the point of onboarding onwards:

ID verification with government-issued documents(depending on local legislation)
Age verification
PEP (Politically Exposed Persons) checks and other AML-mandated checks, including all relevant sanctions lists, watch lists, and crime lists

During signup, you can assess users’ intentions and fraud scores using the following methods:

Device fingerprinting: One of the strongest methods to stop collusive behavior such as bonus abuse and chip dumping, as multi-account abusers often operate all their fraudulent accounts from the same device
Password hash analysis: The most sophisticated fraudsters and scaled multi-accounting abusers will rarely create unique passwords for all of the fraudulent accounts
Digital footprint analysis: The lack of social and digital profiles, the usage of VPNs, the email age etc., can all point towards fraudulent activities; more on this below.
IP fraud score analysis: Similar to device fingerprinting, an IP address can reveal much about an individual’s internet usage, location, and potential for fraudulent activity.
Behavior and velocity checks: Modules that examine someone’s actions at various touchpoints, as well as comparing them across time to see, e.g. whether a lot of users have been logging on with the exact same IP in just a few hours.

Many of these measures can be applied at deposit, withdrawal, and other critical touchpoints to confirm user authenticity and prevent account takeovers, often resulting from stolen credentials or phishing attacks.

Finally, monitoring card information during account top-ups is vital to detect and prevent the use of 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 combination of frictionless yet robust protection – and its extensive experience in the online real-money gaming sector – make it uniquely placed to support gambling operators’ growth with zero compromises to safety. The interpretation of the fraud data from our iGaming clients informs both the best-practice guidance for using SEON’s software solution as well as how we fine-tune the software itself.

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 unique, anonymized identifiers such as device fingerprints and password hashes, SEON effectively detects multi-accounting for collusive play or bonus abuse. These capabilities, combined with SEON’s granularity, make it highly effective in catching online fraud rings, including bot networks, money launderers, and affiliate fraud.

For AML and KYC mandates, SEON equips compliance teams with essential tools. By effectively identifying obvious fraudsters early on, it allows operators to avoid costly, full-scale KYC checks for those clearly in violation, streamlining the onboarding process and reducing expenses.

Key Takeaways

Gambling operators, poker rooms and online casinos face significant challenges in monitoring and preventing fraud, as they operate similarly to digital wallets and encounter various risk factors. Sophisticated tools are essential for analyzing and flagging data, a need that SEON fulfills to combat advanced fraud.

The strict KYC and AML regulations in gambling, with their severe fines and the potential for enabling further fraud, also demand robust support solutions like SEON can assist compliance and risk teams with. Moreover, the success of these businesses hinges on maintaining user trust and fostering relationships with players. If customers doubt the safety or fairness of the platform, they can easily switch to competitors. Thus, effectively preventing fraud and demonstrating a commitment to player security can have long-lasting positive impacts on the business.

Protect Your Platform from Bonus Abuse and Multi-Accounting

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

What are the consequences of gambling chargebacks?

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.

Has anyone been prosecuted for internet gambling fraud?

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.

How big a problem is identity theft for online gambling?

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.

How do I know if someone used my card for online gambling?

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.

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