For online gambling establishments, fraud and cheating are widespread problems that range in scope from individual users acting in bad faith to sprawling networks of unscrupulous parties. The challenges posed by these growing threats not only impact the reputation of internet gambling companies among their existing and prospective customer base — the failure to intervene and stop organised fraud can also pose legal and regulatory issues costing millions of pounds. With such drastic consequences on the table, online gambling businesses must act vigilantly against fraud.

Types of Fraud in Internet Gambling

Internet gambling fraud and abuses come in many different forms. A couple of important recent trends in the industry are outlined here.

Bonus Abuse

Many online gambling establishments offer substantial bonuses as a method of encouraging new customer acquisition, including in areas where regulations have recently been updated to allow for internet gaming.

A 2020 report from the TransUnion company innovation identified bonus abuse as a rising concern in the industry. The study found that there was a 73% increase in reported incidents compared to the previous year, making it a leading form of abuse cited by the organisation’s customers. Online gambling businesses face an important tradeoff in combatting this pervasive threat: taking measures to reduce the risk of profit loss while maintaining an appealing customer experience for legitimate users.

Illegitimate Payments

Credit card fraud and associated financial crimes are not new, but the Covid-19 pandemic has caused business operators to be particularly attentive in their efforts to detect and avoid these issues. A HooYu survey found that 93% of respondents, which included compliance experts from the online gaming industry, anticipated seeing more incidents of fraud and a greater number of chargebacks in the current environment. As the innovation study found, 2019 already saw a 37% growth in credit card fraud for online gaming companies. Again, this is an issue that presents real financial and compliance issues for internet gambling enterprises while simultaneously presenting a risk that being overzealous could degrade the user experience for legitimate customers.

Strategies for Limiting Online Gambling Fraud and Abuse

Given the stakes — in the form of government fines, decreased profitability and customer loss — it’s critically important that internet gambling businesses carefully and thoughtfully implement best practices and advanced technology to combat rising fraud and abuse.

Know Your Customer (KYC) Is Just the Beginning

A 2020 article from CPO Magazine outlined the importance of Know Your Customer (KYC) techniques for verifying user identities as a method of preventing fraud and screening against self-exclusion lists while ensuring regulatory compliance within relevant jurisdictions. This is also an important method for maintaining adherence to anti-money laundering (AML) laws and best practices.

AML compliance advice released by the U.K. Gambling Commission emphasises the importance of ongoing monitoring and internal training, as well as using a risk-based approach to the business’s response relative to money laundering risks. After an initial KYC check, based on known risk factors, online gambling companies may have to participate in enhanced monitoring or terminate commercial ties with certain account holders.

Device Mapping

In the innovation report, results from a survey of the company’s gambling business customers were included. About 70% of the respondents indicated that they used innovation to help them find fraud rings and shut down these illegitimate operations. The report’s authors noted that by analysing user patterns and connections between various accounts and devices, online gambling businesses may be able to better identify suspicious activity. Rooting out coordinated criminal activity that exploits internet gambling enterprises should be a primary concern for all leaders in the industry.

Technology-enabled device mapping and automated processes for identifying high-risk accounts or networks of users will prove essential for helping gaming enterprises complete their due diligence while maintaining customer satisfaction on their platforms. Not only do business operators in the online gambling space have a duty to their users and the authorities in the areas where they conduct business, but they also have a civic duty to ensure their platforms are used in a responsible and ethical manner, and only for their intended purpose.

The complexities of these compliance challenges speak for themselves, and the risk of failure can quickly add up to large financial penalties, damaged customer trust and more. In addition, online gambling requires a robust system of technological checks and balances, like strong encryption, to prevent data breaches and other cyber security incidents. For additional support in your effort to mitigate cyber risk, ensure compliance and provide a seamless customer experience, find out how the experts at Saphisle can help. Contact us or book a meeting today to learn more.