Online gambling fraud: effective preventative measures

December 6, 2021
December 6, 2021
Online gambling fraud prevention

Online gambling was more popular than ever in 2020. Pandemic lockdowns drove people towards at-home activities, and gambling sites were one of many beneficiaries.

However, as things become more popular with punters (or players), they also attract the attention of scammers. A general increase in internet usage has spurred a dramatic increase in the value of all types of cybercrime - up 300 percent.

It’s a multi-billion dollar industry that is driving more and more business owners to protect themselves with online fraud prevention.

For gambling websites, that means it’s more important than ever to protect both your business and your customers from the effects of online gambling fraud.

What is Online Gambling Fraud?

Fraudsters have been targeting casinos and other gambling institutions for years. Most people understand how sleight of hand and trickery can tip the odds of a game. The same principle that is behind these kinds of techniques has inspired fraud in the online gambling world.

Online gambling fraud refers to any instance where a rogue actor manipulates or exploits an internet gambling site for their own gain. The rules around online gambling are designed to make games fair, but these rules can be bent or broken by fraudsters looking to increase their winnings.

There are a range of scenarios that fraudsters utilize to come out ahead, which are discussed below. The victims can be either the house/gambling site itself, or its punters.

Why do gambling platforms have an increased risk of fraud?

Online fraudsters generally have a low chance of success. People are becoming increasingly wary of falling for scams, and businesses are taking steps to protect themselves from all different types of online payment fraud.

However, when fraudsters do succeed, the returns are lucrative. IBM found the average business cost of a cyber attack in 2020 was nearly $4 million.

Gambling platforms are at a greater risk of being targeted recently due to their burgeoning popularity since the 2020 pandemic. When more people flock to a certain trend, that means more potential victims for fraudsters to target. If a gambling site goes from having 1 million annual visitors to 2 million, that means there’s an extra million people who could be ripped off.

Gambing websites are also likely to have high transaction volume, with players making many payments regularly. This may make it more challenging to detect card testing or even catch individual fraudulent purchases.

How Does Fraud Affect Online Gambling?

With online gambling scams on the rise, the risk to gambling websites is more than just losing money. Customers are more likely to prefer sites they feel safe on, which means they will avoid those that they believe can be easily exploited.

47% of consumers said in one survey that if they encounter any issues in the payment process, they'll abandon a brand and go elsewhere. This means that even if there are not any successful fraud attempts, that brand is very quickly tarnished in the minds of people who’ve been targeted by fraudsters.

Defrauded customers can quickly become a problem for companies too. Credit card holders can get defrauded money returned to them in the form of a chargeback, which comes directly from the businesses bank account that processed the scam.

There may not be much you can do about this either. Your customers may initially lose money to scammers, but it ends up coming out of your pocket.

What Are the Most Common Types of Online Gambling Fraud?

As mentioned, online gambling fraud can take a few different forms. It’s important to be aware of the most common methods of gambling fraud, but also to stay on top of new or emerging trends as well. When you know how you’re likely to be targeted by scammers, you can learn how to protect yourself.

Some of the most common techniques are multiple account fraud, credit card fraud, and chargeback abuse.

Multiple Account Fraud

Multiple account fraud (also known as multi-accounting) is the most common type of online gambling fraud. Having more than one account involved in one game presents a range of opportunities that scammers can take advantage of, but typically the immediate losers in this scenario are your other players.

For example, in a poker game, if a fraudster controls six hands and there are only two other people playing, there is a far greater chance that one of the fraudster’s hands will win.

The two most common ways fraudsters get around this is by using multiple devices, as well as utilizing different IP addresses via a VPN to try to avoid being detected.

Gnoming, bonus abuse and chip dumping are also all forms of multiple account fraud, but we will go into each of these cases in more detail below.

Gnoming

Gnoming is where a fraudster creates multiple accounts with one online gambling site, and then uses the accounts to get around standard rules.

Online gambling often comes with maximum bet limitations, but when fraudsters have multiple accounts, they can get around these limits.

This is significant considering the previous example about one fraudster controlling multiple poker hands. Being able to go over maximum bet allowances means the fraudster can bet big on a hand they know they have a good chance of winning.

Chip Dumping

Chip dumping is similar to gnoming, and is a common form of online poker fraud. When fraudsters control multiple accounts at one poker table, they can drive up the betting for legitimate players knowing they have more of a chance of winning the hand.

In a legitimate game, money lost in a game goes to another player. But when fraudsters have multiple players, losing a hand to a player they also control is essentially just the same as a bank transfer.

For example, the fraudster can bet hard on one hand that doesn’t have great cards to encourage legitimate players to bet big too. They can also follow with a hand that does have good cards, but because that player isn’t upping the ante then other players perceive them differently.

Manipulating games this way can make a big difference to the chances other players have of winning. It is an important part of gambling that everyone has a fair chance to win based on the odds of the game; all of the above multi-accounting tricks make it less likely your fair players will have an enjoyable experience.

Bonus Abuse

In this scenario, the gambling platform is the one that is going to be paying out of pocket for fraud. This is one of the more basic online gambling scams that takes advantage of online casinos making offers to new account holders.

Bonuses can include free money for your first bet, coupons or discounts. These types of deals help gambling sites attract new customers, and in a competitive environment they can help you to stand out from your competitors. However, they’re not without risk.

Fraudsters can set up multiple accounts from different email addresses, devices or IP addresses. These bonuses may not be worth a lot, but it’s free money to the fraudster and money you’ve just given away for nothing.

Credit Card Fraud

For fraudsters who get their hands on a stolen credit card, online gambling sites can be a great place to drain the funds on that card. It can be as simple as opening an account, depositing the funds, and cashing out immediately.

Other credit card frauds generally have some down time for them to make money - they need to make purchases from stolen credit cards, and on-sell the items they’ve bought. In this instance, even if they play a few hands of poker and lose, they still walk away with a lot more money than they had initially.

Stolen credit card credentials are commonly bought and sold on the dark web, so this is a very real risk for online gambling websites.

Chargeback Fraud

Chargeback fraud is where customers exploit a form of insurance on their credit card that (ironically) protects them from fraud.

A chargeback gambling transaction can be initiated by a customer when they’ve lost a lot of money. They can call their bank, or credit card issuer, and claim their card was stolen or used without their permission.

The bank can then opt to reimburse their losses directly from the bank account of the online gambling website, even if the website challenges the circumstances.

In this instance, it helps the gambling site’s case if it can show it takes steps to prevent stolen credit cards from being used.

How Can Merchants Prevent Online Gambling Fraud?

The nature of online gambling means it’s always going to be attractive to fraudsters. However, there are things you can do to minimize online gambling risks, and they can make a significant difference.

A general theme that helps to prevent online gambling fraud is knowing exactly who your customers are. When you do, customers can’t create multiple profiles and they can’t use credit cards that aren’t their own. You can also dispute chargeback fraud attempts.

There is a range of techniques you can use to properly identify customers:

  • Encourage strong passwords and two-factor authentication. This makes it much harder for fraudsters to access other people’s accounts.
  • Use identity verification services that identify user data such as IP address, email, and geolocation.
  • Implement fraud prevention software that can conduct risk assessments based on the browser behavior of users and raise red flags over users that display suspicious activity.

A leading tool in online fraud prevention is browser fingerprinting. An online fingerprint can be generated for every visitor to your web app, which can then be used to track their browsing activity and behavior over time. Browser fingerprints are designed to stay the same even if a visitor uses a VPN or goes into private browsing mode, allowing sites to catch fraudsters trying to conceal their identity.

One very useful application for browser fingerprinting for gambling sites is to prevent multi-accounting. Fingerprints can be used to verify users as they log in to their accounts, making sure people are only using one profile at one time. You can also block fraudsters whose fingerprints have been previously associated with fraudulent activity on your site from ever logging in again.

Conclusion

Taking steps to prevent online gambling fraud is a must. It’s virtually inevitable that fraudsters will attempt to defraud your online gambling business at some point, and it can be hugely damaging if those attempts are successful.

Online gambling sites need industry-leading fraud prevention, and Fingerprint can help.

Fingerprint uses the very latest in fingerprinting technology to identify suspicious users that pose a security threat with 99.5 percent accuracy. The technology is easy to implement and requires no maintenance, giving you peace of mind for minimal effort.

Fingerprint software has been used since 2012 to identify billions of internet users, creating a world-leading database that protects businesses of all shapes and sizes from the ever-growing threat of cybercrime.

All article tags

  • Gambling
  • Gaming fraud