Online gaming provides a lot of benefits and convenience compared to traditional casinos. However, it also comes with a lot of challenges in terms of compliance and cyber threats. In the past few years, online fraud increased by as much as 64% on average.
Businesses need to implement proper fraud prevention methods to protect both their operations and their users. More sophisticated fraud types and cyber attacks emerge along with new types of technology and gaming platforms.
This article explores some of the most problematic types of fraud in iGaming businesses can face, as well as the best methods that can prevent them.
Online gaming fraud explained
In the context of this article, online gaming fraud refers to the exploitation of online gaming platforms for someone’s individual gains. This can mean that they use the platform to steal accounts, and funds, manipulate games, or launder money.
The accessibility of online gaming platforms allows individuals from different walks of life to play. But, this also attracts wrongdoers who have intentions of exploiting the platform’s users or the platform itself.
Gaming fraud can be conducted by professional hackers who leverage cyber attacks to exploit the platform’s vulnerability. On the other hand, it can be something as simple as an individual creating multiple accounts in order to get bonuses or manipulate tables in games such as poker.
Businesses need to pay attention to fraud that happens on their platform, as it can lead to other users losing trust in the platform. Furthermore, if fraud happens repeatedly, the platform can draw the attention of the regulators, leading to lost licenses or fines.
The latest technology, such as AI, has brought significant advantages to traditional fraud detection software. While this is only one of the methods, it’s certainly one of the most innovative ones.
On the other hand, we have traditional protocols such as identity verification. The methods below should be combined to protect against common fraud types.
Fraud prevention methods
1. iGaming anti-fraud systems
One of the most innovative ways of recognizing and stopping fraud is through specialized software. Paired with AI, anti-fraud systems can analyze millions of activities and accurately flag suspicious ones.
This tools, for example, scan transactions that certain users conduct and recognize anomalies, such as withdrawals from different locations and sudden large transactions. Similarly, online gambling fraud prevention can recognize suspicious betting patterns.
Manually observing all the different games and activities would take too much time and personnel. With the help of automated detection, the only flagged cases need to be reviewed further by employees.
However, such software can go a step further. For example, they can take digital footprints of the devices users use to create accounts and check them against dozens of databases. This allows businesses to adequately recognize accounts as high-risk, bots, or doubles.
2. Compliance with regulations
Being compliant with regulations is important if you don’t want to get fined. However, they can also serve as guidelines on how to properly operate as an iGaming business. Licensed gambling platforms must adhere to strict guidelines set by regulatory bodies.
The most notable regulators include the Gambling Commission (UKGC) and the Malta Gaming Authority (MGA). Staying compliant with these regulations allows iGaming platforms to have their licenses, ensuring that fair play is present on their platforms.
Regulations also require anti-money laundering (AML) measures, responsible gaming policies, and stringent security protocols to protect players and financial transactions from businesses.
3. Blockchain and smart-contracts
Blockchain technology was created with the intention of avoiding financial institutions when making transactions. Cryptocurrencies and blockchain have a widespread application in iGaming, for the better or, the worse.
Gaming platforms can use blockchain to ensure that all transactions happen transparently and that they can be observed by anyone. Furthermore, smart contracts allow for the automation of processes such as payouts and bet settlements.
4. Advanced identity verification
Identity verification has a proven advantage for minimizing fraud related to iGaming. Logically, no one would dare to conduct fraudulent activities if the platform and the law could easily identify them based on their information.
This is why it’s essential to implement verification protocols. Besides the basic information, such as first and last name, it’s essential to implement extensive know-your-customer measures such as ID identification.
Depending on the laws and regulations your business adheres to, ID verification could be required during the account creation process or once the users try to make their first transaction. In both cases, it ensures that the individual is who they say they are.
Additional verification methods can be included via biometrics. For example, the users will have to scan their faces from different angles, allowing them to be identified, and to check whether their look matches the photograph from the ID card.
Common types of fraud
There are endless different types of fraud. However, for online gaming platforms, the examples below are most commonly observed, which is why I’ll cover them specifically.
1. Money-laundering
One of the most significant problems an iGaming platform has is being exploited for money laundering. This can lead to significant legal repercussions and even loss of operating licenses, regardless of whether the decision-makers on the platforms were aware of what was happening.
One of the most important prevention measures for this is implementing advanced KYC verification. This includes screening users to see if they’re politically exposed persons (PEPs) which includes high-ranking politicians and political figures, making them high-risk.
Money laundering can also be curbed through compliance with AML regulations and setting transaction limits on withdrawals and deposits.
2. Identity theft
Identity theft occurs when a scammer steals personal information to create an account or access an existing one. From this point, they use the account to abuse bonuses, manipulate games, or steal funds.
Victims of this fraud experience loss of funds and access to their accounts. The business, in turn, will witness a loss of trust among the customers or even face penalties if it’s in any way their fault.
The best way to prevent your customer’s sensitive information from being stolen is to implement advanced authentication measures, such as MFA. This ensures that even if a person’s credentials are stolen, they’ll also need access to an SMS code or their email. With biometric authentication added to the mix, it gets quite hard for the bad actors to steal accounts.
3. Bonus abuse and multi-accounting
Bonus abuse refers to the activity of creating multiple accounts in order to obtain “Welcome”, and other types of bonuses. Furthermore, many iGaming businesses have mandatory “responsible gaming” features, such as self-exclusion.
This means that the user isn’t able to bet after they’ve lost a certain amount of money. Some individuals create new accounts to avoid these features and continue playing. When it comes to games like Poker, it’s possible to use multiple accounts in order to manipulate the hand.
Multi-accounting, for whatever purpose, prevents fair play in many cases and leads to losses for the platform. It can be prevented by implementing IP address and device tracking, allowing the business to prevent users from logging in to multiple accounts from the same computer or network.
Setting a strict KYC can also help with preventing the creation of multiple accounts. For example, it’s possible to create accounts with multiple emails, but if each account on the iGaming platform requires an ID, it would mean that no person can have more than one account.
4. Phishing attacks
Phishing attacks involve hackers who create fake websites that resemble yours. They use email and other communication methods to lure users to log in there and leave their credentials.
While phishing attacks aren’t directly your responsibility, it’s still important to spread awareness of them. Periodical emails or SMS to your user base notifying them about phishing attacks and how to recognize them can be quite helpful.
Preventing online fraud is essential for gaming platforms
Cyber threats and fraud are always going to be present for gaming platforms. There aren’t many solutions that could guarantee protection against 100% of the risks that are present in this landscape.
However, it’s essential that iGaming businesses implement crucial fraud prevention methods, such as monitoring software and KYC protocols, to stay compliant with the latest regulations.
In the long run, the costs of implementing fraud prevention measures are much smaller than the fines businesses could face if they experience data breaches or break regulations because of fraudulent activities.
