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

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

Today, we’ll look at the very 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 look 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.

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 online gambling 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.

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: 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.

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.

• 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 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 gaming 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.

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 includes implementing a risk-based fraud detection software solution that helps keep in line KYC mandates, but also addresses risks associated with the online gambling sector specifically. These particular risks are exemplified in SEON’s recent statistical analysis of iGaming fraud, which looked at both the kinds of fraud plaguing online gambling operators, but also at the security thresholds that successfully stopped it.

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 score using the following methods:

• Device fingerprinting was found to be 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 was the method SEON discovered to be more likely to catch all but the most sophisticated fraudsters, as scaled multi-accounting abusers will rarely be creating unique passwords for all of the fraudulent accounts
• 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 score 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:

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 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.

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, which can be an invaluable tool when assessing new users for bot-like behavior.

On top of this, we found that each user’s device fingerprint hash and password hash, unique identifiers that are also anonymized to protect user privacy, were extremely efficient at flagging instances of multi-accounting for collusive play or bonus abuse. As mentioned, fraudsters who employ multiple accounts or attempt to automate account creation through bots are unlikely to be creating unique passwords for every account, nor are they likely to be using a unique device for each. This makes password hash analysis in particular a very strong defense against all but the most sophisticated fraudsters, and even then the amount of time spent circumventing these checks make scaling difficult for criminals.

Less sophisticated 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.

With these capabilities combined, 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 gambling operators.

As for AML mandates, where they exist, SEON provides compliance teams with the tools they need to bring online casinos within the compliant perimeter. For KYC, 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 gambling online, fraudsters are finding more ways to find loopholes within platforms due to the high-risk nature of the industry.

Our research showed that the online gambling sector experiences huge amounts of variation in the volume and kind of fraud that occurs from region to region. Different regions have different pain points when it comes to sophistication and malicious sign-up attempts, representing the huge spectrum of risk that operators have to deal with — up to a 38% risk variance across regions.

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 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?

Online gambling 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. SEON provides this kind of sophistication, to rise to the challenge of the most sophisticated fraudsters.

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. Again, SEON provides risk and compliance teams with the help they need to steer clear of fines or worse.

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.

Frequently Asked Questions

You might also be interested in reading about:

• SEON: iGaming Affiliate Fraud: How to Stop It
• SEON: Stop Multi Accounting Fraud
• SEON: Best Fraud Detection Software

Learn more about:

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