Overcoming the Challenges of Online Gambling Fraud

The rising scourge of online gambling fraud requires operators to adapt to the evolving fraud tactics and use a combination of industry-specific expertise, advanced technologies, and collaborate with regulators and industry peers to maintain a safe, trustworthy platform.

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The global online gambling market is experiencing exponential growth and is likely to reach $184.28 billion by 2032, at a whopping 190% increase in a decade! This prolific growth comes with its own share of challenges, primarily online gambling fraud that continues to be a big headache for online gambling platform operators. It is estimated that between 2022 and 2024, on a year-over-year average, online gambling fraud rose 64%.

Types of online gambling fraud

Fraudsters exploit the online gambling platforms to execute several types of online gambling fraud. Some common types include:

• Identity Theft and Account Takeover: Use stolen consumer information to create fake accounts or take over existing ones to withdraw funds or make fraudulent transactions.
• Bonus Abuse: The most prevalent type of online gambling fraud at 69.9%, bonus abuse involves creating multiple fake accounts to exploit promotions and claim bonuses multiple times offered by online gambling sites.
• Money Laundering: Deposit illicit money in gaming accounts to quickly withdraw funds with minimal gambling activity.
• Money Muling: One of the most widespread online gambling fraud types, it involves recruiting genuine users for money laundering.
• Collusion: Team up to cheat genuine players in multiplayer games by sharing information and gaining an unfair advantage.
• Chargeback Fraud: Use stolen credit card details to deposit funds and then request chargebacks.
• Bot Use: Use automated scripts and bots to play games at speed and scale that humans cannot match.
• Phishing and Social Engineering: Trick users into sharing their login details that are then used to access and drain accounts.
• Match Fixing: Profit from bets placed on the predetermined result of a sporting event by manipulating the outcome.
• Fake Gambling Sites: Create fraudulent gambling websites to collect deposits from players without providing legitimate gambling services.
• System Exploitation: Tamper with the game software and number generators (RNG) to skew the outcomes.
• Chip Dumping: Intentionally lose chips to a partner to enable fund transfer from one account to another.
• Insider Fraud: Manipulate employees or insiders of gambling companies to exploit access, manipulate outcomes, or steal funds.
• Arbitrage Gambling: Make guaranteed profit by exploiting differences in odds across multiple bookmakers and placing bets on all possible outcomes of a sporting event.
• Selfie Mismatch: Accounting for 73% of all fraud in Q1 2024, selfie mismatch is the most frequent type of online gambling fraud and involves using doctored or stolen selfies to bypass identity verification processes.
• AI-Powered Deepfake Scams: Having grown ten times over between 2022 and 2023, in this type of fraud, scammers use sophisticated deepfake technology to create realistic but fake videos or images to impersonate legitimate users or fool user verification systems.

Reasons driving the rise of online gambling fraud

The prime reason fueling the rise in online gambling fraud is the rapid growth of the industry itself. Growing volumes of players and transactions, increasing use of digital payments and cryptocurrencies, and the ease of using online platforms from anywhere and any device, has created new opportunities for fraudsters.

Access to sophisticated and commoditized criminal toolkits is enabling fraudsters to launch complex attacks. They use automation and bots to achieve scale and speed, as well as to power phishing and social engineering campaigns. The ability to tap into the cybercrime ecosystem for detection evasion techniques enables fraudsters to easily bypass security measures.

Hiding behind the anonymity of the internet, fraudsters can operate across geographical locations, making it difficult for fraud fighters to track and catch them. This is exacerbated by varying regulatory standards across jurisdictions that create loopholes for fraudsters to exploit. Consumers’ lack of familiarity with a wide range of online gambling fraud and the security best practices also contributes to the rise in online gambling fraud.

Challenges posed by online gambling fraud

Online gambling fraud poses significant challenges for platform operators and negatively impacts their bottom lines. For instance, chargeback fraud causes operators to lose the deposited amount and incur additional fees and unwarranted scrutiny. Bonus abuse drains promotional budgets without attracting genuine customers. The inability to fight money laundering activities results in non-compliance with anti-money laundering (AML) regulations and legal repercussions.

Fraudsters use advanced technologies such as artificial intelligence and machine learning to automate and scale their attacks as well as to evade detection. This increases the frequency and complexity of online gambling fraud, requiring operators to continuously adapt and upgrade their fraud detection systems, which can be both costly and resource-intensive. Even after investing in the latest fraud prevention measures, balancing security with user experience may pose a huge challenge. Not only do multiple fraud prevention systems add to technical debt, but overly stringent measures can irritate legitimate users and disrupt the user experience.

Online gambling fraud damages the reputation of gambling platforms. Frequent incidents of fraud can cause consumers to lose trust, resulting in a decline in active users. Aggrieved consumers voicing their discontent on social networks can affect the platform’s ability to attract new customers, thereby impacting business growth.

The anonymous nature of the internet and global online gambling environment further complicate the efforts to fight fraud. Navigating varying regulatory landscapes and jurisdiction-specific compliance requirements add to the challenge for operators. These legal lacunae impact collaboration between operators, regulatory bodies, and law enforcement, adversely impacting consistent and standard implementation of anti-fraud measures on a global scale.

Methods to fight online gambling fraud

Fighting online gambling fraud requires operators to adopt a multi-faceted approach that combines technology and collaboration. By using the methods listed below, operators can significantly reduce the risk of online gambling fraud.

• Advanced Fraud Detection Systems: Implementing smart fraud detection systems that leverage machine learning algorithms and artificial intelligence to detect unusual patterns and behaviors, and trigger real-time notifications for administrators.
• Real-Time Monitoring: Continuously monitoring of user activities and transactions in real-time to identify and swiftly respond to suspicious activities.
• Multi-Factor Authentication (MFA): Requesting users for two or more forms of identification before accessing their accounts.
• Behavioral Analytics: Analyzing user behavior to identify anomalies, such as rapid changes in betting patterns or logins from unusual locations.
• Comprehensive KYC (Know Your Customer): Implementing robust KYC processes to verify the identity of users during registration and on an ongoing basis to ensure authenticity.
• Geolocation and IP Tracking: Using geolocation and IP tracking to identify and block access from high-risk regions.
• Limits and Controls: Setting limits for transactions and withdrawals, and implementing other controls to detect unusual activity early.
• Encryption and Secure Data Handling: Preventing unauthorized access by encrypting all data, especially financial and personal information, both in transit and at rest.
• Regular Security Audits and Incident Response Plan: Conducting regular security assessments and penetration tests to identify and fix potential weaknesses in the platform. Having an incident response plan for swift action.
• Collaboration: Working closely with regulatory authorities and other operators to share information on emerging threats, collectively enhancing security measures, and ensuring compliance with anti-fraud and anti-money laundering regulations.
• User Education and Awareness: Educating users about common online gambling fraud tactics, such as phishing and social engineering. Encouraging them to use strong, unique passwords and enable MFA.

Stop online gambling fraud with Caf

Caf’s expertise and experience in fighting online gambling fraud is well-established internationally. Leveraging the industry-specific knowledge and combining it with advanced technologies, Caf significantly improves the security of online gambling platforms. With the ability to access a vast repository of public and private databases, Caf quickly and accurately validates thousands of unique documents. Furthermore, the latest threat intelligence from Caf’s client network and ALL.ID enables its partners to identify fraudsters engaging in online gambling fraud.

Caf’s user-friendly, seamless, and more accurate identity verification solutions, enable operators to onboard more users quickly and securely, without degrading the user experience.  Caf offers the flexibility to quickly build and deploy multiple identity and authentication workflows that helps fight online gambling fraud deterministically, while maintaining a superior user experience and ensuring compliance with various global and local regulations. Ready to fight online gambling fraud with Caf? Book a demo now.

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