Online Gambling Fraud: How It Works & How to Stop It;

Questions about online gambling fraud you were too afraid to ask? You’re in the right place. In this series of articles, we’ll look at the very basics of fraud, how it affects businesses, and how to protect yourself with the latest solutions.

What Is Online Gambling Fraud?

Gambling fraud sees cybercriminals look to abuse or defraud an online casino/bookmaker with no direct involvement from the match itself. These scams happen when fraudsters try to manipulate or exploit an internet gambling site for their financial gain. 

Match-fixing is your typical scenario of one part of the competition “throwing a bunk” whereas gambling fraud is the concept of exploiting one aspect of the operator’s business.

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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.

  • Multiple account fraud: This is the cornerstone upon which many gambling attacks are built. Fraudsters create dozens or hundreds of accounts using fake credentials in order to tilt the balance in their favor online. For instance, they could use it for:
  • Bonus abuse: Whereby 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.
  • Gnoming: Once again using multiple accounts to help one player win. The other accounts are used to lose deliberately so one can pocket all the wins and bonuses that go with it.
  • Chip dumping: This is a practice found 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.
graphic of the 4 common types of online gambling fraud

Then, there are the payment attacks. Online casinos and gambling platforms are essentially digital wallets, so processing payment means potential for losses there too.

  • Stolen credit cards: Fraudsters can use stolen card information to top up their account, which means using illegitimate money to pocket real wins.
  • Chargebacks: This happens after the fraudsters have already topped their account. They then request a chargeback from their banking or credit card provider, which means getting refunded at the online gambling provider’s expense.
  • Phone top-up abuse: If your online casino offers phone top up, fraudsters can trick victims into funding their accounts for them. They rely 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 iGaming account.

Finally, like with real brick-and-mortar casinos, owners have to watch out that 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.

How to Prevent Online Gambling Fraud

One of the most important processes for any kind of online business is to follow a good KYC practice (Know Your Customer). This will involve a number of steps including the very basics during the user registration:

  • ID verification (depending on the local legislation)
  • age verification (an important legal requirement that is a must)
  • PEP (Politically Exposed Person) check – a title typically relating to individuals with a prominent public personality such as heads of state, ambassadors, high ranking military officers and more…

See a basic walkthrough below of how SEON catches online gambling fraud, in real life.

During signup, you can still continue monitoring data using the following methods:

  • Device fingerprinting – finding information about the device used, as some of them will instantly point to suspicious usage.
  • Email analysis – emails are often linked to social media accounts, which makes it easy to track fake accounts.
  • IP fraud analysis – similar to device fingerprinting, an IP address can reveal a lot about an individual’s internet usage, location, and potential for fraudulent activity.

Some of these steps can also be used at login, to ensure that the right user is using the right account. Device fingerprinting and IP analysis can also help flag account takeovers (whether credentials have been stolen or acquired through phishing attacks).

Finally, during account top-ups, it’s important to monitor the credit card information to ensure it hasn’t been stolen or doesn’t pose a high-risk threat.

process to prevent online gambling fraud step by step

Which Third Parties Do You Need to Use?

If you want to fight against online gambling scams, you should know that Cross Referencing huge amounts of data are humanly impossible, which is why fraud managers will need to turn to third-party solutions. These will include:

  • ID verification provider
  • Politically exposed person list provider
  • Anti Money Laundering regulators (AML)
  • Sign up monitoring
  • Log in monitoring
  • Withdrawal and deposit monitoring
  • Actual games and tables monitoring

How Does Fraud Affect an Online Gambling Site?

Fraud impacts online gambling sites negatively. The downsides are pretty evident, and shared across all kinds of online businesses:

  • Loss of revenue: Whether it’s due to spending money on chargebacks, losing bonuses, or wasting time chasing bad players, fraud is costly.
  • Bad reputation with payment processors: Online gambling sites are already considered high-risk by payment processors. Fail to control your chargeback rates, and you risk being banned from using their network – which would essentially sink your business.
  • Loss of resources: Think of all the hours your team has to spend chasing fraudsters and improving processes to reduce risk, and you’ll quickly see how there’s more than monetary damages to fraud.
  • Overwhelming support agents: Fraudsters wreak havoc with your business processes, which is often reflected in customer service complaints. The burden of solving these complaints falls on your support team, who can quickly become overwhelmed with requests.
  • Compliance issues: It is no secret that regulators are cracking down on online gambling sites. Fail to spot fraud or self-excluded players, and you could face some hefty fines, not to mention legal troubles.
  • Reduced customer satisfaction: As per the above point, failing to solve fraud issues for legitimate players will inevitably result in them seeing your company in a less favorable light. 

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.

Why Are Online Gambling Platforms at Increasing Risk of Scams?

As technology continues to improve and the pandemic forcing more players online, fraudsters are finding more ways to find loopholes within bookies operations due to the high-risk nature of the industry.

The online gaming industry has unique challenges with the difficult position of finding the balance between acquiring new punters and managing risk.

The Rise of Online Gambling

As the internet gambling market continues its meteoric rise, operators become increasingly high targets. Today, we’ll see what kind of challenges they face, and how to protect their business in the long run.

It’s predicted that by the end of 2023 the iGaming industry will generate a global revenue rate of $92.9 billion with major markets such as the US, Germany, and Spain all recently legalizing online gambling.

The Explosion of Online Gambling Scams

Gambling is inherently risky. It’s part of the thrill but for online gambling operators, this risk takes a different form than for its players. It’s to do with fraud and the number of ways in which nefarious individuals can exploit loopholes in their platform.

How Does Online Gambling Fraud Happen?

Internet gambling scams happen when the fraudster looks to abuse a promotional abuse through multi-accounting or use stolen credit cards/IDs whereas online gambling scams see the perpetrator actually involve themselves with the game instead and look to camouflage themselves as an honest punter.

Fraudsters will look to abuse and leave as soon as they make funds, however, active players will participate in scams to ‘beat the bookie’ and continue playing for as long as they can get away with it.

Scams can also be devised from the operator themselves through rigged betting/games that are set up to have zero chance of winning them.

Key Takeaways for Gambling Fraud

Gambling operators and online casinos do not face an easy task when it comes to monitoring and preventing fraud. Since they essentially operate as digital wallets, they will run into numerous risk factors, which requires sophisticated tools to analyze and flag data.

However, like numerous other industries, implementing even a basic solution could be a huge boon. For instance, it will help them prevent loss of income from chargebacks, which can help increase their bottom line.

More importantly, their business relies on user trust and building relationships with the players. If they do not believe the platform is safe or fair, they have enough competitors to turn to. Which is why preventing fraud and showing players that you are working for them can only have positive consequences on your business in the long term.

Protect your Business from Bonus Abuse and Multi Accounting

SEON is more than just a software solution, we’re your partner in reducing gambling fraud scams!

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Frequently Asked Questions

What are the consequences of gambling chargebacks?

Since iGaming 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.

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 iGaming fraud, this is because 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?

One obvious sign is to check if you have any unauthorized transactions on your bank statement. Also looking at your recent gambling history for any behavior you don’t recognize or if there’s an increase in communication from your chosen operator can be two other signifiers.

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Learn more about:

Data Enrichment | Browser Fingerprinting | Fraud Detection API | Fraud Detection with Machine Learning & AI

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Communication Specialist

Florian helps tech startups and global leaders organise their thoughts, find their voices, and connect with customers worldwide.

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