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

Questions about online gambling fraud you were afraid to ask? You’re in the right place.

Today, we’ll look at the very basics of iGaming fraud, how it affects businesses, and how to protect yourself with the latest solutions.

What Is Online Gambling Fraud?

Online gambling fraud sees cybercriminals look to abuse or defraud an iGaming 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.

When fraud analysts talk about gambling fraud, we refer 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 iGaming company – and/or facilitate other fraud.

Naturally, online gambling does attract fraud a lot, due to its sheer accessibility as well as traditional ties of the offline industry with money launderers. Equally, it also attracts the interest of regulators and legislators – no matter if we’re talking about a poker room, online casino, slots website, bingo room or bookmaker.

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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, 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.
    • 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.
graphic of the 4 common types of online gambling fraud

Then, there are the payment attacks. Because they require deposits and withdrawals before you can play, 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: After someone has already used a stolen credit cared 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 get refunded at the gambling operator’s expense, as well as incur some processing charges, to add insult to injury…
  • 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 iGaming account.

Finally, like with 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.

process to prevent online gambling fraud step by step

How to Stop Online Gambling Fraud

One of the most important ways to stop fraud for any kind of online business is to follow good KYC (Know Your Customer) practice.

This will involve a number of steps including the very basics during the user registration:

  • ID verification (depending on local legislation)
  • age verification (an important legal requirement)
  • PEP (Politically Exposed Persons) check – a title typically relating to individuals with a prominent public personality such as heads of state, ambassadors, high-ranking military officers, etc.

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

  • Device fingerprinting – identifying information about the player’s device, including software and hardware.
  • Digital footprint analysis – legitimate emails and phone numbers are often linked to at least a few social media accounts and other online platforms, which says a lot about their owner. More on this below.
  • 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.
  • 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.

Most of these steps can also be used at deposit, withdrawal and other touchpoints, to ensure that the right user is using the right account. For example, device fingerprinting and IP analysis can 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 card information to ensure it hasn’t been stolen or doesn’t pose a high-risk threat.

Part of how this is done is via a BIN lookup, which you can try out below. Just enter the first six digits of a card number to find out more about the issuing bank:

Free bin lookup!

Enter the first 6 or 8 digits of a card number (BIN/IIN)

Bank Name
···· ····

Text here

Cardholder name
Bank
Brand
Type
Level
Country
Phone

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 tables monitoring

How SEON Prevents iGaming 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 iGaming operators’ growth with zero compromises to safety.

Fully customizable, explainable and transparent, despite its potential for complete automation, the end-to-end solution provided by SEON investigates each customer by identifying and assessing their online footprint (or lack thereof) from 50+ reliable sources.

On top of this, device fingerprinting, velocity checks and machine learning rule suggestions promise excellent results while avoiding false positives.

In simple terms, the platform will use the email address, phone number and/or IP provided by a new player looking to sign up to create a full profile of that person. The result will tell us, for example, how many social media profiles this address is linked to, approximate the date of creation of the account, and so on.

seon email data enrichment

Why is this useful?

Because fraudsters will typically create new email addresses for each of their fake personas. Someone looking to defraud your online casino, betting site or poker room will not spend time simulating online activity for their fake personas – and even if they do, they will not be able to create some of the more reliable data points, such as when the person last stayed with Airbnb, or whether they subscribe to Netflix.

As a result, SEON’s granular, customizable end-to-end platform is excellent at catching online fraud rings, including bot networks and multi-accounting, as well as money launderers, affiliate fraud, and virtually every pain point faced by iGaming operators.

As for AML and KYC mandates, where they exist, SEON can save you money by acting as a pre-KYC check. Because it can safely weed out obvious fraudsters, you will not have to waste money running full document verification/KYC checks for those who can be excluded from the get-go, thus streamlining onboarding.

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 for operators.
  • 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, as players wouldn’t be able to make deposits using their method of choice.
  • Waste 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.
  • Overwhelmed customer support: 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 trouble too.
  • Reduced customer satisfaction: Failing to solve fraud issues for legitimate players will inevitably result in them seeing your company in a less favorable light, if not leaving for a competitor altogether.

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 Is Online Gambling at Increased Risk of Scams?

As technology continues to improve and more players turn to iGaming online, fraudsters are finding more ways to find loopholes within platforms 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 – as well as keeping existing players satisfied, considering the intense competition in the sector.

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 aspects of real-money online gaming.

The Explosion of iGaming 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?

iGaming fraud happens whenever an operator fails to detect that a person, such as a player or affiliate, is lying about who they are and what they are doing. There are several different ways in which this can take place, including account takeovers, bonus abuse, carding and more.

Let’s look at some examples:

Internet gambling scams can happen when the fraudster looks to abuse a bonus promotion through multi-accounting. Or, they could use stolen credit cards/IDs to make deposits.

Other online gambling scams see the perpetrator actually involve themselves with the games instead and look to camouflage themselves as an honest punter in order to e.g. launder money, thereby obscuring its original source.

Fraudsters will look to abuse and leave as soon as they make funds – however, active, every-day players may also participate in scams to “beat the bookie”, such as arbitrage or matched betting, and continue playing in ways that are not allowed (or are outright illegal) for as long as they can get away with it.

Key Takeaways

Gambling operators, poker rooms 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.

Both KYC and AML in iGaming are pain points, because of strict legislation and sizeable fines, as well as because of the additional fraud these can enable.

Like in numerous other industries, implementing even a basic solution could be a huge boon for iGaming operators. 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. This 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 Platform 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. 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 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 look at your recent gambling history for any behavior you don’t recognize, in which case 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:

Learn more about:

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

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Author avatar
Florian Tanant

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


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