Combating Fraud in the iGaming Niche: Ways to Protect Casinos

Rewards for registration, free spins, and welcome bonuses — all this can be used to increase traffic and brand awareness and develop a loyal customer base. However, it also attracts fraudsters, which is why operators may lose their revenues.

Experts of the CASEXE studio will tell you about bonus abuse in the casino industry and the sports betting sector. We can also provide information on methods of dealing with delinquents and the role of gambling regulators in this matter.

About the Concept of Bonus Hunting

It means a fraudulent activity that is aimed at making a profit from promotions, free spins, and bids, as well as other types of rewards.

Those who have been found to have committed violations are called bonus hunters. They can be not only registered clients of an online casino or bookmaker’s office but also bots or criminals. They create multiple accounts, use proxy servers, and change IP addresses to hide their actions from operators.

Amy Watkins, business development manager in the GBG consulting company, stated:

Bonus scam flourishes and costs the iGaming sector approximately 15% of annual gross income.

Let us consider the most common schemes:

1. Collection of rewards for registration. Dishonest players always search for welcome gifts. Most often, this is a bonus for filling out a special form or making an initial deposit. The fraudster’s task is to quickly cash out the money without actually launching slots on the platform.
2. Multi-accounting. The scammer creates several profiles that are apparently unrelated to each other. Sometimes, they may belong to bots. The main purpose of the offences is conspiracy, gaining an illegal advantage over honest customers, and stealing bonuses.
3. Fold. This pattern is often found in online poker. A player intentionally “loses” chips to another participant at the card table. This is how it affects the outcome of the hand and the distribution of bonuses.
4. Arbitrage. It means the simultaneous placement of bids on opposite outcomes of one event (round, sports game, or a friendly match). This type of fraud is called a surebet.

The online sector is more exposed to risks related to bonus abuse than the land-based niche. It can be explained by the active digitalisation of the industry and the transition of a huge number of gamblers to the Internet.

Moreover, new fraudulent tools are appearing (masking software, bots-aggregators, and TOR browsers), which are becoming more and more difficult to detect.

How the iGaming Vertical is Losing Money Due to Bonus Abuse

According to Statista, online sportsbook and casino niches will grow by 11.3%. Customer acquisition and retention costs will also increase, given the fact that the market is highly competitive.

Analysts claim that:

• first-level operators (their GGR exceeds $100,000) spend 18% of annual gross revenue on bonuses;
• second-level entrepreneurs give 25–45% of their income until they form a stable client base.

Unreasonable losses in this budget line (due to an ineffective reward system and bonus abuse) will not lead to an increase in profits and will become a serious test for the enterprises.

However, businessmen cannot completely stop giving rewards. A sharp reduction in loyalty programs will lead to a decrease in Internet traffic and casino conversion. iGaming platforms risk losing regular customers and worsening their position in the highly competitive market.

In addition to bonus abuse, operators suffer from cybercriminals and fraudulent payment schemes.

Statista experts claim that in the first half of 2023, the largest number of cyber attacks on the iGaming sector in the entire history took place:

• the frequency of pressing “strikes” has increased by 250%;
• the number of failures grew by 20% during high seasons (finals of major competitions and Christmas holidays);
• the intensity of attacks from mobile devices has increased by 50%;
• 4% of logins to the gaming system were associated with fraud;
• 57% of clients caught on bonus abuse used IP addresses of data centres to log in;
• 1 of the 4 new accounts turned out to be fake.

60% of all cyber attacks were performed in the US, India, China, the UK, and Vietnam. These countries have different approaches to the legalisation of gambling and well-developed IT structures. To destabilise casinos, fraudsters used powerful hardware and software.

How to Minimise Losses from Bonuses Theft

Let us consider the most popular techniques used by the owners of online casinos and betting shops:

Thorough User Verification

Factors that indicate potential fraudsters:

1. Suspicious IP addresses. Delinquents use VPN programs, the TOR browser, and blacklisted proxy servers.
2. Atypical speed. Dishonest gamblers or bots go through the registration or verification procedure much faster compared to typical players. Many fields are filled in automatically using the software.
3. Fast payments. Fake accounts often choose to fold or withdraw winnings right after registration. Such users are not interested in staying on the website for a long time.

A thorough analysis of new profiles allows entrepreneurs to quickly identify intruders and protect their iGaming platforms against hackers and bonus hunters.

Multi-Factor Authentication

Operators are offered the following options:

• Heavy KYC (Know Your Customer). This is a more secure process, which takes 1–5 minutes. As an example, we can cite a request to verify the player’s identity using a selfie. Fulfilling this requirement is time-consuming, and gamblers usually do not like it too much. But that is how business owners can be sure that customers are honest, not bonus hunters.
• Light KYC. This simplified procedure takes 1–2 seconds. Identification can be performed automatically, for example, by studying the user’s digital footprints. In theory, the method is safe. In practice, fraudsters can use various loopholes (proxy servers, masking software, etc.) to bypass registration rules.

The Use of Mobile Intelligence

Amy Watkins noted:

MI helps entrepreneurs identify fraud in real-time via a secure smartphone.

The technology is based on the use of information provided by a reliable mobile operator and API-based data.

Key features of Mobile Intelligence:

1. Checking the dedicated number. Business owners can verify that the provided data is valid and not forged by the VOIP service, cancelled, lost, stolen, or compromised.
2. Comparison of a mobile phone with a person. This prevents the same number from being used several times.
3. Detection of the replacement of a SIM card and call forwarding. It often means that a mobile device has been stolen and used by fraudsters.
4. Two-factor identification. It is based on a one-time call or SMS message, geolocation, and IP address verification.

Wagering Requirements

Owners of iGaming sites offer too flexible conditions for the withdrawal of bonuses. Sometimes, a casino may not have a wager at all, which is why delinquents can easily steal money from operators.

The higher the requirements, the lower the likelihood of becoming a victim of scammers. Ideally, there should be no offers without wagers at all.

The following strictest terms are set by top bookmakers:

• number and type of bets;
• time and region for scrolling bonuses;
• right of extension, and other parameters.

The number of spins can reach x5 or x6, which encourages gamblers to place more bids.

What Games and Wagers Are Worth Paying Attention To

Entrepreneurs can reduce the risks of bonus abuse by introducing a reward system for each type of content:

1. Blackjack. Like most card entertainment, it has a higher RTP percentage. Therefore, players can use legal mathematical analysis tools to gain an advantage. The easiest way to protect online casinos from scammers is to exclude this game from the bonus offer.
2. Roulette. Here, one gambler can completely control the volatility and frequency of winnings at the table. It is achieved by evenly distributing the sum of money on each number (from 0 to 36). In the worst case, the user loses exactly 1/37 of the bid, and in the best case, they receive a good reward. The risks of bonus abuse can be reduced by setting higher requirements for the placement of bets in roulette.
3. Slot machines. In this case, fraud occurs due to the special functions of digital solutions. Players spin the reels using bonus funds and save their money for additional rounds. As a result, casino rewards are spent ineffectively, and operators lose profit.

International Practice of Combating Bonus Hunting

Innovations in the regulatory framework of the world’s leading gambling jurisdictions play into the hands of iGaming business owners.

The authorities establish:

• winning limits;
• maximum sizes of bids for limited content;
• betting requirements.

The tools help reduce ludomania and minimise cases of fraud. The restrictions also cover many different risks associated with bonus abuse.

Operators no longer need to increase special offers. They optimise marketing costs and prevent manipulations with payments.

United Kingdom

Some of the most stringent requirements are provided by the UK Gambling Commission (UKGC). It obliged casino owners to check the solvency of their customers and banned advertising of such establishments, as well as the acceptance of bets on credit funds.

In 2023, the government presented a new bill called White Paper. The authorities plan to limit the size and number of rewards and free spins that will be offered to gamblers.

The UKGC’s tough approach to the regulation and monitoring of bonuses is bringing results.

In 2021, John Howard, a fraudster from Essex, was sentenced to 5 years in prison. This is the first severe punishment for this crime that has been adopted in the UK.

Howard played a leading role in the syndicate that created more than 1,000 fake accounts on the Bet365 website. The scheme involved the theft of welcome bonuses and bypassing deposit limits. Due to the actions of the delinquent, the bookmaker lost about £236,000.

Sweden

The Spelinspektionen regulator limits the amount of incentives to €10 per gamer. The maximum weekly deposit and the amount of loss are set at €471.

In 2019, the Commission fined two local operators (Genesis Global and AG Communications) for offering recurring bonuses to Swedish players.

USA

The online casino and betting market appeared quite recently — in 2018 — but bookmakers are already noticing its oversaturation with bonus offers.

Entain’s CEO, Jett Nygaard-Andersen, announced the reduction of marketing activities in 2024. Major changes will affect New Jersey.

The fact is that the legislation of this state prohibits the inclusion of the amount of bonuses in the structure of the company's operating costs.

Modern Software That Can Prevent Bonus Abuse

Let us consider what top vendors offer:

Greco

The brand’s team works in several areas:

• analysis of the casino and sports betting market;
• studying international experience in combating bonus abuse;
• creation of programs aimed at automating the management of rewards and promotions.

The company takes a holistic approach to the prevention of this fraud type. It is based on investigating the value of an individual user or group of clients, the analysis of their preferences, and the use of combined techniques to control the costs of acquisition and audience retention.

The brand’s proprietary platform contains:

• effective business analytics tools;
• options for managing marketing offers;
• mechanisms to reduce fraud risks, and much more.

EveryMatrix

The Maltese developer offers a premium BonusEngine solution with the following useful features:

1. Customisable rules of the accrual of bonuses. They are based on such attributes as type of games, content provider, RTP, special characteristics, etc.
2. Widgets. The tool provides a holistic view of key performance indicators and the overall effectiveness of bonus campaigns.
3. Cross-wallets. They were created to establish seamless betting. Rewards are automatically credited to a special wallet within the platform. Before withdrawing them, casino visitors must wager the funds on the website several times.
4. Gamification functions. These are tournaments on cross-products (for example, slot machines and lotteries), multi-level quests, consolation prizes without restrictions on the level of cashback, and free spins.

The Main Things about the Fight Against Fraudsters in the Gambling Field

The phenomenon is a common problem in the casino and sportsbook industry.

• The most popular schemes include multi-accounting, fold, and arbitrage. Delinquents are also after welcome bonuses and use masking software, bot aggregators, the TOR browser, and other tools to steal money from iGaming platforms.
• The harm from such a crime can be minimised thanks to the careful verification of players and the introduction of multi-factor identification based on KYC. Operators use Mobile Intelligence technology and set stricter wagering requirements to protect themselves from unreasonable expenses.
• Leading jurisdictions (for example, the United Kingdom and Sweden) are focused on the tightening of the reward system in casinos and bookmakers’ offices. Regulators introduce limits on the size of bonuses, the number of types of rewards, the time of the withdrawal of funds, etc.
• The decision to connect security software will protect business owners and allow them to combat bonus abuse more effectively. Today, modern and relevant solutions are presented by Greco, EveryMatrix, and many other providers.

Experts of the CASEXE studio offer comprehensive risk assessment options for iGaming projects, installation of security programs, and development of an individual marketing strategy.

From us, it is also possible to order the following useful services:

• creation of a turnkey online casino;
• integration of a White Label platform;
• launch of a Bitcoin resource;
• assistance in obtaining a licence, and much more.

For all questions, please contact our managers.