Transaction Monitoring in iGaming: How It’s Used to Fight Fraud

A seamless customer experience is one of the highest and most important benchmarks for online casinos and other gambling operators. However, these companies also fall within the perimeter of industries that have to maintain AML compliance in order to continue operations.

This includes mandates to make sure new onboarding customers are real people, of appropriate age, and not sanctioned in any way, as well as requiring iGaming organizations to watch the transactional behavior of their customers.

Though it is a legal requirement for the iGaming vertical, transaction monitoring in the wider sense is generally a smart decision for any online business.

Having proactive fraud detection software that monitors transactions helps mitigate losses to the types of fraud common to the iGaming vertical like account takeovers (ATOs) and bonus abuse. It can, however, also represent customer journeys that are interrupted by moments of high friction, which all iGaming operators want to avoid.

To balance a high-quality customer experience while also complying with AML regulations, automated software is crucial – but how can it be used to thread that needle?

Why Is Transaction Monitoring Important in iGaming?

Transaction monitoring is an essential part of preventing your iGaming platform from becoming a part of criminal money laundering or the financing of terrorism.

Carrying out due diligence to avoid such a situation is mandated by AML regulations. These regulations put a fence around specific transactions that have been deemed more likely to be associated with financial crimes, with exact numerical thresholds.

Failure to keep business operations inside this fence can result in debilitating fines – with over $264 million in fines handed out to iGaming companies in 2022 alone.

Notably, regulators are constantly reevaluating the placement of these fences, and the iGaming industry obviously has to contend with other layers of safety regulations such as age verification and gambling awareness.

Navigating all of these layers is a complex job that requires diligence as well as the right tools for the job. Staying on top of where the lines are drawn and redrawn is important in the pursuit of due diligence and regulatory risk mitigation.

How to Automate Your AML Transaction Monitoring in iGaming

For verticals like iGaming that tend to thrive depending on how well they can roll out the red carpet for prospective customers, automation is an obvious benefit to smoothen out the kinks and avoid embarrassing trip-ups.

Automation-enabling software like SEON helps smoothen the customer onboarding process – another crucial step in maintaining AML compliance – while also providing continuous monitoring for suspicious activity.

By leveraging pre-KYC checks, device fingerprinting, and other methods for frictionless authentication, obviously good customers can have a relatively seamless journey while having their behavior monitored for money laundering to an extent that satisfies legal requirements and provides safety.

Meanwhile, customers with a high likelihood of malicious intent based on their risk signals can be put on pause for manual review, or even blocked, depending on your risk appetite. Automation for these processes helps minimize moments of necessary customer friction that occur during the identity verification process or at the deposit stage. 

A secure journey across an entire user base is never without a few bumps, however. Keep in mind that an AML-compliant automated process will include:

• transaction monitoring capabilities that can be customized to suit your risk appetite as well as applicable suspicious activity thresholds
• cash and foreign currency transactions that have to be kept labeled and logged
• scalable internal processes that can handle large sets of high-dimension data
• cross-checking names registered in the course of the KYC process with relevant lists, including PEP, sanctions, and crime watchlists
• automating or facilitating the reporting of potentially criminal activity by generating comprehensive audit reports and filing Suspicious Activity Reports (SARs)
• the need for a software provider that automatically makes adjustments and updates to watch lists and protocols as the changing legislature calls for it

These processes will be the responsibility of the fraud solution to handle, but achieving a valuable level of automation is a two-handed process that requires certain things of your company as well.

In conjunction with an end-to-end software platform, you will have:

• a definable risk appetite around which to customize your risk rules
• designated members of staff whose job is to log and submit SARs and CTRs (Currency Transaction Reports, which apply in the case of hard fiat currency transactions)
• a compliance team that is outfitted with all the necessary tools – which, in the iGaming industry, should probably include round-the-clock human resources and reporting tools
• a maintained, up-to-date knowledge of applicable regulations that works in tandem with software (which should achieve this automatically)

If you are able to satisfy all the points above, both your transaction monitoring and overall compliance should be easily executable.

Top 3 Custom Rules for Compliant Transaction Monitoring in iGaming

If your iGaming platform’s goal is to achieve AML compliance at the transactional level, there are certain thresholds that you should be aware of.

Certain transactions should automatically trigger an internal process that leads to an SAR being submitted to regulatory authorities. These include:

• an individual known to be suspicious making transactions aggregating to over $5,000
• any individual, regardless of their other data, aggregating over $25,000 in transactions
• transactions using funds known to be the proceeds of criminal activity

A CTR should also be filed whenever a customer uses physical cash to deposit $10,000 or more.

Furthermore, behavioral analytics should be tuned to flag any unusual transaction behavior that might indicate an account takeover or even evidence of bribery or corruption if the person is named on a PEP list or is one of their Relatives and Close Associates (RCAs). 

Here are three risk rules deployable with SEON that can detect instances like the above that could pull your company into non-compliance.

#1: Suspicious User Crosses Transaction Threshold

Customers who have been deemed suspicious by the merit of being from a sanctioned country or appearing on a PEP list, for example, constitute a potential risk. Many gambling operators still want their business, but these players need to be scrutinized more carefully at the transaction level. 

The exact monetary thresholds differ between international jurisdictions, but AML regulations generally require operators to be aware of exactly how much money has gone in and out of those potentially suspicious accounts. When they break a certain threshold, an SAR should be triggered, to avoid being fined.

In this screenshot from inside SEON’s platform, we can see two relevant rules being triggered: The user is in a country that has been deemed high AML risk (according to the custom rule). Moreover, the transaction is over the suspicious threshold of $3,000.

Though the US mandates this hard threshold at $5,000, some may prefer to scrutinize their potentially suspicious users at different transactional points.

Here, the rule has been tuned to pause this user’s journey until their activity can be manually reviewed. That review may include the submission of an SAR and a judgment call as to whether that user should be allowed to continue.

#2: Unusually Large Transaction Value

If a customer suddenly shows a change in deposit behavior, it usually is a good thing for gambling operators who are expecting to collect on some of it. However, in instances of such behavior, where, for example, a customer suddenly deposits 200% more than they ever have before, operators should consider how much risk they want to take on.

This kind of behavior could indicate an account takeover, money laundering with a money mule, or even coercion. Not only does this potentially represent an unwanted fraudster in your midst, but it will also leave you exposed to regulatory punishment.

In this screengrab, we see that a rule has been set up to detect instances of a 200% increase in transactions within the previous day. As the user has deposited so much more than usual in the last 24 hours, this rule has triggered a manual review, so that a fraud analyst can check that everything is as expected.

Failure to have such a protocol in place could lead to reputational damage and AML fines, as those conducting money laundering through their own fake accounts or through accounts they have taken over tend to launder as much money as possible before they are identified and stopped.

#3: User Is from High Risk Country

Determining which users constitute a greater legal risk can be tricky online, as every privacy-minded customer could potentially be hidden behind IP proxies, a Tor client or VPN. That doesn’t mean that the iGaming operator doesn’t want their business, though.

What it does mean is that identifying high-risk users requires software that can uncover such spoofing tools, for the sake of maintaining a compliant environment.

Here, we have a screenshot of the SEON platform where a custom rule has triggered, set up to pause user journeys who are determined to be from a high-risk AML country, send them for manual review, and put them onto a monitoring list.

As shown in rule #1, users deemed suspicious in this way should be closely watched so that, when their transactions break certain thresholds, an SAR can be filed.

How SEON Helps iGaming Operators with Transaction Monitoring 

SEON is outfitted with all the tools needed to help bring iGaming platforms of all kinds into AML compliance, mitigating the risk of both malicious fraudsters and regulatory fines. 

Not only is SEON able to deploy and easily adjust the sensitivities of AML rules like the ones above, but it also provides customers with a system of dynamic friction. Though becoming fully AML and KYC compliant means there will be some inevitable bumps through the onboarding and deposit processes, obviously good users are treated to the minimal amount of friction legally possible, so you can make sure they enjoy a seamless CX.

By unpacking alternative data within a user’s digital footprint, SEON allows you to assess hundreds of indicators linked to a user’s goodness or badness. Revealed through SEON’s social media lookups manually or automatically, a normal, healthy online presence is a strong indicator of real personhood and real accountability.

In the case of SEON’s customized AML rules being triggered, transparent audits of the user’s activity or even individual transactions are easily provided in .pdf form, for submission alongside an SAR.

Bringing your iGaming platform into AML compliance is always a multi-pronged effort. No software can guarantee airtight regulatory adherence without some degree of human oversight, including the SAR submission process. However, SEON is the perfect tool for compliance teams to transparently do all they can in terms of due diligence – a strong paper shield to wave in the face of potential fines.

Related Case Studies

• Soft2Bet Automates Risk Reviews, Freeing Up 40% of Their Resources
• Lindar Neutralized Fraudsters They Didn’t Know Existed
• iGaming Innovators Reveal Customer Connections and Suspicious Activity With SEON

Related Articles

• What Is AML Transaction Monitoring & How to Set It Up
• AML Fraud Detection: How to Detect It & Prevent It
• Understanding Payment Fraud in iGaming

Sources

•  GGBnews: Global 2022 Casino Industry Fines Topped $264 Million