Types of risks for online casinos and sportsbooks: most popular fraud schemes
Virtual gambling market is growing rapidly, attracting hundreds of billions of dollars as investments. These huge turnovers make online casinos a prime target for fraudsters, so that owners should not underestimate risks.
As online fraud techniques become increasingly sophisticated and smart, methods of protection must also continually evolve and improve. Game and payment providers invest substantial amounts in developing effective anti-fraud systems. Online casino and sportsbook operators need to assess these risks when drafting business plans and allocate sufficient budget for anti-fraud departments. These experts know how to make sportsbooks and casinos maximally secure.
So what fraud is?
Generally, “fraud” refers to the wrongful or criminal deception intended for financial or other personal gain. In the context of online casinos, any action of a player that violates User Agreement is considered fraud. These are the Terms and Conditions that players must familiarize themselves with during registration and accept to create a new account. Therefore, if a player deliberately or inadvertently breaches these Terms, casino has the right to ban them or delete their account. This is the primary measure to reduce risks for online casinos, involving monitoring players and taking necessary preventive actions.
Fraud schemes are numerous and include personal data theft, stealing money using someone else's details, exploiting chargebacks, registering under false names and details, and many more.
Both in sportsbooks and casinos, the number of players attempting to win by fraudulent means is increasing day by day. Fraudsters are highly inventive and often share experiences in specialized communities hidden in the darknet. Therefore, operators must know how to secure their online casinos and possess the necessary tools for this. Let's explore the main fraud schemes in gambling portals.
Understanding these schemes is a key to making sportsbooks and casinos impregnable to criminals, therefore safe for everyone.
How to combat fraud in online casinos and sportsbooks
- Develop internal company rules: These should be established at the very beginning and must comply with current legislation. Every visitor of online casino or sportsbook should be familiar with and accept these rules during registration.
- Create an analytical department: This department should be budgeted for and dedicated to tracking any suspicious behavior. It should work closely with the anti-fraud department, or they may even be combined into one.
- Develop detailed action protocols: These should be aligned with modern Know Your Customer (KYC) and Anti-Money Laundering (AML) policies, which are implemented by legislations of all countries where gambling is legalized.
Protecting gambling portal from fraud is the responsibility of anti-fraud department in close collaboration with top management. Regular testing of the security systems could be helpful to find the weakest link where fraudsters are most likely to strike. Security personnel should routinely check protective systems, conduct monitoring studies, and stress tests to identify vulnerabilities. Fraudsters are inventive and continuously refining their methods, so anti-fraud systems must also evolve. Both software providers and security personnel should vigilantly follow technological developments, monitor new fraud methods, and timely implement necessary protective mechanisms.
Correctly assessing and managing risks were never so important for online casinos; any lapse in security can deal a devastating blow to the casino's reputation. Visitors must know that their money and personal data are secure. Modern gambling business implies comprehensive implementation of KYC and AML policies. According to the 4th EU Money Laundering Directive adopted in 2015, every new user registered at an online casino must be thoroughly checked for presence in economic crime databases and sanction lists, as well as connections with politically exposed persons. This directive also requires continuous monitoring of financial transactions.
Comprehensive verification of users in sportsbooks and online casinos
Customer Due Diligence (CDD) is a policy designed to ensure that only law-abiding users access iGaming platforms, not with the intention of fraudulently acquiring funds or laundering money, but for entertainment purposes. This involves comprehensive scanning and risk assessment for each new user.
Risk for each user is assessed based on criteria such as:
- Geographical origin: Determining if the player is from a high-risk or low-risk country, including checking if their country of origin is on any sanction lists.
- Source of income: Verifying the legality of their income.
- Payment methods: Reviewing the payment methods used in the casino.
Enhanced due diligence, going beyond the basic KYC policy, involves special attention to individuals in categories such as:
- Individuals without a steady income or those handling large amounts of money that cannot be traced.
- People from high-risk countries.
- Individuals with a criminal record.
- Politically exposed persons.
- Those who have significantly changed their behavior, particularly in the number of transactions.
- Tourists and other casual visitors who are not part of the casino's main audience.
- Duplicate accounts.
These risk categories were established by the Financial Action Task Force (FATF), an intergovernmental organization created to combat money laundering and terrorism financing in the world. As gambling is closely tied to financial risks, risk management for online casinos requires special attention. A superficial approach is highly ineffective and can lead to several unpleasant consequences. To avoid these, experts at Monoup recommend developing a comprehensive fraud monitoring system and are ready to assist your business in this endeavour.
