Fraud

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

April 26, 2024
Online Gambling Fraud: How It Works & How to Stop It

In 2018, the Supreme Court changed the game by opening the doors wide for online gambling across the United States. This sparked a new, exhilarating era of digital betting. Since then, the industry has only surged, significantly boosting the economy. According to US Census data, gambling tax revenue soared to over $500M in just the third quarter of 2023 alone, with New York taking the lead by contributing nearly $190M of that total. This influx of cash has been a windfall, but it’s not without its shadows.

As online gambling skyrockets, so do the risks of fraud, a concern highlighted by a 2022 Wall Street Journal report. Despite its growth, the US finds itself playing catch-up with European efforts to curb gambling fraud. It’s crucial for gambling platforms and their financial allies to tackle this challenge head-on, ensuring the digital betting landscape is not only exciting but also safe and fair for all.

The landscape of online gambling fraud

Contemporary gambling fraud is more than just online casino fraud; it spans areas such as online betting platforms and monetized esports and video games.

The most prevalent kinds of online gambling fraud in these areas are:

  • Identity theft: Attackers steal a user’s credentials and make bets in their account illegitimately, which may result in costly refunds or chargebacks.
  • Payment fraud: Bad actors use stolen credit cards or bank accounts to set up accounts or fund activity in accounts unassociated with the payer.
  • Bonus abuse scams: Scammers use sign-up bonuses (i.e., free bets, better odds, or other credits) at scale across multiple accounts.
  • Collusion: Attackers work together to tip the scale in one or more fraudsters’ favor, overriding balancing for the platform and other players.
  • Cheating software: Players use hacks and other illegitimate tools to gain advantages over platforms and other players, delegitimizing earnings.

Platforms targeted by scams are often subject to chargebacks in which they pay back funds spent illegitimately. Beyond lost earnings, there are more subtle effects on these platforms and their players. In 2022, WSJ highlighted a wave of customer dissatisfaction related to withdrawal delays stemming from anti-fraud vigilance.

Regulatory compliance and fraud prevention

According to WSJ, sports gambling is growing as a vector for money laundering, as fraudsters use large bets to hide sources of money. This raises questions for online gambling sites beholden to financial services regulations such as anti-money laundering (AML) and know your customer (KYC) requirements.

Part of the burden gambling platforms bear is ensuring secure gambling practices by verifying their players’ identities—confirming that they’re who they say they are, both when they make an account and across every (legitimate) activity made with that account.

How to detect online gambling fraud

Detecting online gambling fraud comes down to knowing what to look for. Specific types of fraud (see above) each have their own indicators. 

For example, consider how:

  • Suspicious account activity is a sign of account takeover in gambling
  • Multi-accounting fraud can be pin-pointed by duplicate names or details
  • Anomalous spending is an indicator of payment fraud in online gambling
  • Bonus abuse may be afoot if there’s a huge uptick in account generation
  • Disproportionate winning may be a sign of collusion or cheating software

Anti-fraud technology can be configured to monitor and flag transactions or other account behaviors with elements like these.

Another indicator of other online gambling scams—odd or unclear language—has to do with their origin. Per the New York Times (NYT), a major source of gambling fraud is Cambodia, where gangs coerce tens of thousands of people to create scams on an industrial level—language barriers at scale lead to dead giveaways, like syntax errors.

Advanced technologies and tools in fraud prevention

There are many ways fraudsters can disguise the use of credit card fraud or identity theft in gambling. They can carefully plan out attacks, stretching smaller spurts of illegitimate activity over longer durations or keeping the overall scale to a minimum.

These possibilities highlight the importance of artificial intelligence (AI) and machine learning (ML) in fraud detection and prevention. 

AI and ML tools can process information faster and more accurately than human observers. Platforms can use these tools to scan ID documents and process them efficiently. Once collected, ML tools can compare documents and behaviors across a user’s history, referencing threat intelligence from across the global industry to verify identity more acutely.

How to prevent online gambling fraud

Detection is only the start of fraud prevention. Gambling platforms also need to commit to comprehensive prevention and mitigation of fraud risks, which entails:

  • Strengthening payment security
  • Educating players about fraud schemes
  • Collaborating with regulators and law enforcement

Ultimately, AI-powered identity verification, AML, and KYC verification processes are some of the best ways to detect gambling fraud schemes early before they cause financial harm.

Microblink’s BlinkID enables frictionless ID capture allowing banks, financial institutions, online gambling platforms, online casinos, and other organizations to meet and exceed KYC and AML requirements, secure their platforms against fraud, and maintain optimal customer experiences.

Contact us today to discover how Microblink can help you stay one step ahead of fraud. 

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