The world of gambling as online gambling has witnessed a fast-growing business, and it’s expected to exceed $117 billion by 2025. But all of this growth has drawn the attention of clever swindlers who take advantage of weaknesses in digital platforms. According to a recent report from the industry, gambling and betting sites lost more than $1 billion to fraud in 2024 alone, with rates of fraud skyrocketing 64% since 2022. As fraudulent strategies continue to evolve and become increasingly sophisticated, operators are under increased pressure to secure their services and users while also maintaining a consistent user experience and adherence to regulatory requirements.
Online gambling fraud consists of any deceptive activities undertaken in online betting and gaming venues to manipulate the outcome of a gambling event, take advantage of game design weaknesses or defraud players and operators for financial gain. Unlike conventional casino fraud, digital platforms have unique challenges, as they lack the immediacy of face-to-face interaction, as well as anonymity in online transactions. This allows bad actors to generate a web of cash, use the stolen payment credentials, form fake accounts, game results, and launder dirty money on the net.
Bonus fraud is the single most common form of fraud that the gaming industry may experience, with incidents rising 72% over the year 2018 to 2019. Fraudsters invent a series of accounts under false identities, dummy email addresses, and virtual private networks to constantly demand welcome bonuses, free bets, and exclusive offers, and then take those money and rewards from them. This “bonus-hunting strategy” – which many call “bonus hunting,” is a well-documented tactic – undercuts marketing promotions and results in a lot of financial losses. A few more complex schemes include affiliate fraud, where ‘legitimate accounts’ associated with referral programs using fake accounts are connected to referral accounts to increase the number fraudulent payments.
Also known as “friendly fraud,” chargeback fraud happens when players intentionally challenge legitimate payments with their card issuers once they have lost money. Players say their cards were stolen or used without permission, causing banks to be forced to remit losses directly out of operator accounts. This kind of fraud is especially harmful as gambling platforms come under more scrutiny from payment processors and pay higher fees and penalties for excessive chargebacks.
Between 2020 and 2021 account takeover swelled at a rate of 90% with a damage of approximately $11.4 billion. Phishing attacks, credential stuffing, and data breaches were employed to gain access to legitimate player accounts. By compromise, these accounts are used to siphon off money, obtain private details; use your personal info; make unauthorized payment with unauthorized users and help to perpetrate financial fraud, and more. Personal information theft involves opening accounts based on stolen personal details to evade verification processes.
Online casinos and sportsbooks are more often being abused for money laundering in a technique known as “layering.” Crime syndicates launder dirty money by depositing hidden financial deposits in the systems, sending high stakes or low-risk bets through a range of internet platforms, and withdrawing whatever has been earned as a win. This approach leverages the large transaction levels and quick funds in the casino circuit. There are schemes in games like poker that involve making intentional losses to accomplices, so criminals can use that as an opportunity to move the funds along without detection systems that target betting against the house.
Collusion, the actions of multiple players coming together and unfairly shifting the rules. In poker, for example, players who are in collusion exchange information about their hands to work harder than they would with other players. Gnoming is another variation, where players appear in different places through location spoofing technology, though in real life they play together from the same location. Match-fixing involves not only individual games but also the performance of events such as sporting events which is rigged, causing the guarantee of a payment to the player for a certain amount of time, huge financial loss for bookmakers and regulatory punishment.
They deploy automated software and bots to take advantage of platform weaknesses, alter odds, gain unearned advantages. They also can perform registration to the account at untimely speeds, wager using algorithmic gambling methods to take advantage of odds calculations and even engage in massive fraudulent business activities that are unthinkable to execute manually. The detection of bots has become more difficult, as artificial intelligence has made these tools harder and more sophisticated and indistinguishable from human behavior. The use of fake accounts and altered referral systems is exploited in affiliate programs that pay partners for new customers. This creates a network that allows fraudsters to obtain referral bonuses in return for a fake player but at no cost to the platform, leading to wastage of marketing budgets, as well as distortion of performance metrics.
For gambling operators, fraud presents a direct and cascading set of consequences that reach well beyond financial aveasance. Fraudulent activity can contaminate performance data when it goes undetected, so the operator doesn’t recognize whether they are seeing real growth or the fraudulent inflation. Conversion rates, average deposit sizes — such key performance indicators can spike artificially and that can skew business decisions. Moreover, real players who get fraud or security threats lose their trust and exit indefinitely and the system (and it’s users) which reduces customer lifetime value and incurs acquisition costs.
Direct costs of fraud can include theft, stolen finances, bogus withdrawals, budget wastage due to promoting an unwanted bonus and losses incurred from chargebacks. Failing to act adequately may lead to increased rates of fraudulent expenses. Operating as high-risk merchants with excess fraud rates, which also leads to increased payment processing fees, operators will be forced to incur additional, more severe payment processing fees. Gambling is generally viewed as high-risk by default by many payment processors, and even poor processing penalties arise when this risk is mismanaged and can dictate either increasing terms to the highest and/or close the entire account.
The penalties for anti-fraud measures failure and regulatory violation are severe. Operators who are caught up in money laundering or who fail to check their customers’ identities have been hit with large fines by international regulators. When it gets extreme, operators might have that license suspended or revoked, meaning they can no longer work in certain jurisdictions.
Reputation degradation goes beyond user numbers to impact payments processors, partners and government regulators. News of breach of security, fraud or non-compliance can be quickly disseminated to industry and player communities. Operators with bad security track records are struggling to fill premium player positions and partnering with the premium players from their market and do not have a lot to prove that they work alongside good players as well.
Players’ faith in the platform tends to fade quickly when they fall victim to fraud and/or observe security issues. Account takeovers, identity theft and stolen winnings push players to competitors who have implemented more secure technology. Customer support teams are bombarded with fraud-related queries leading to the lowering of service levels for every user and further decreasing satisfaction scales.
Regulations governing online gambling look very different across jurisdictions, creating very complex compliance landscapes for operators. Only six states in the United States currently allow online gambling, forcing operators to ensure that players don’t engage outside sites where they are already permitted to participate. European markets are subject to frameworks such as the EU’s Fourth and Fifth Anti-Money Laundering Directives, and emerging markets in Latin America and Asia are implementing their own regulatory environment. Brazil’s Law No. 14,790/2023 or Mexico’s Gaming and Raffles Law are among them as they show how regions are implementing online gambling regulation.
AML/KYC regulations for gambling are core features of gambling compliance regimes. Compounding the anti-money laundering and Know Your Customer mandates are the knowledge and banking controls that are the crux of gambling compliance laws. For example, in the United States, operations would need to satisfy the Bank Secrecy Act and requirements under the Financial Crimes Enforcement Network, which mandate rigorous customer due diligence, transaction monitoring, and suspicious activity reporting programs. In the UK, the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 regulate the process of transmitting or receiving money and require that a country conduct regular and robust verification and a diligent process of monitoring and auditing. Such duties will require operators to establish identity checks on customers, determine money laundering risks, and monitor transaction activity for suspicious behaviour, maintain records (often thorough) and report suspected misconduct.
The Financial Action Task Force set global rules for combatting money laundering and terrorist financing. In 2009, FATF updated its Recommendations substantially to increase the responsibilities for the gaming industry and to designate casinos as “designated non-financial businesses and professions” that are subjected to strict controls. The FATF guidelines stress risk-based approaches to the approach based on risk and encourage firms to treat customers and transaction risk profiles as an essential customer / transaction risk profile for operational strategy, instead of just a one- of risk-based compliance resources, according to their guidelines FATF recommendations. International cooperation undertaken by FATF leads to information sharing among regulatory bodies, harmonized compliance standards on the use of information across jurisdictions throughout the board and aligned levels of compliance with international cooperation of the regulatory authorities, and coordinated legal and regulatory actions to the implementation of cross-border money laundering activities.
AI and machine learning have transformed the detection of frauds, and allow systems to sift through a huge amount of data and spot patterns of anomalies directly in real time. They help to determine baseline behavior for every user through the measurement of betting patterns, transaction history and activity timing. If users depart from their pattern in a large way, a review process is triggered via automatic alert automation. Machine learning models learn new fraud patterns and improve their accuracy as well, by predicting and preventing false positives and detecting complex attacks (a hallmark of those which rule-based systems may miss).
Know Your Customer processes form the first line of defense against fraud. Today, identity verification comprises multiple levels: document checks through artificial intelligence-based systems to verify identity from government-issued documents, biometric authentication based on facial recognition and liveness to determine whether the person providing credentials matches that document, database verification through official records, and address checks to ascertain residence. Geolocation technology fulfils a series of two functions: meeting with regulators and preventing fraud. Operators should verify that players only use the services of a lawful jurisdiction. Tamper-proof geolocation solutions consist of GPS, WiFi signals and Bluetooth data to identify the spot for a user accurately and prevent spoofing.
Using advanced behavioral analytics, companies can get insight on how users interact with platforms, and discover anomalies that would suggest fraud. Monitoring may comprise login pattern and device use, navigational behavior and session time, betting and game interaction, and entry speed and types of input. Transaction monitoring solutions would detect suspicious financial activities like quick deposit and withdrawal, activity that comes just below reporting thresholds, abnormal size and frequency of bets and connections between accounts that appear to have no connections.
Risk scoring gives numbers to customers and transactions based on transaction volume and frequency, geographic risk indicators, customer verification status, behaviour history, and associations with known frauds. The velocity checks monitor how often specific actions have taken certain actions for certain periods of time, noting rapid account creation from just a single IP address, repeated promotional code usage, multiple failed login attempts and unusual transaction frequencies.
Device fingerprinting creates unique identifiers on each device accessing the platform by gathering information from the browser type and version, operating system features, screen resolution and hardware specifications, installed plugins and fonts, and network characteristics. These fingerprints remain even as users use privacy tools such as VPNs or private browsing modes, giving platforms the ability to recognize the presence of fraudsters who may want to hide their activity. While bot detection systems analyze interaction patterns to help differentiate between automated software and human users — including mouse movements and click patterns, typing time and rhythm, navigation flow and timing, and response times to prompts and challenges.
KYC Hub provides comprehensive compliance and fraud prevention solutions specifically designed for the gaming and gambling industry. Our platform enables operators to streamline verification processes while maintaining the highest security standards and regulatory compliance across multiple jurisdictions.
Advanced Identity Verification: KYC Hub’s automated verification system validates customer identities from over 190 countries within minutes using document and facial recognition technology. Our solution combines AI-powered document forensics with biometric authentication to detect forged documents and ensure the person creating an account is who they claim to be.
Age Verification and Responsible Gaming: Our platform helps operators effectively manage age verification to prevent underage gambling and comply with responsible gaming regulations. Automated checks ensure only legally eligible individuals can access age-restricted services.
Sanction and PEP Screening: Comprehensive screening against global sanctions lists, politically exposed persons databases, and adverse media sources helps operators identify high-risk individuals and meet anti-money laundering obligations. Our screening service streamlines customer onboarding while ensuring thorough risk assessment.
Transaction Monitoring and AML Compliance: KYC Hub’s transaction monitoring solution provides real-time alerts for suspicious activities, helping operators detect money laundering patterns, unusual betting behavior, and other red flags. Our risk-based approach ensures compliance with global and local AML regulations including FATF guidelines, US Bank Secrecy Act requirements, and UK Money Laundering Regulations.
Workflow Automation: Our workflow automation solution increases efficiency and accuracy in compliance processes, reducing manual review burdens while maintaining high detection rates. Automated screening and onboarding processes allow compliance teams to focus on high-risk cases requiring human expertise.
Continuous Monitoring: Beyond initial onboarding, KYC Hub provides ongoing monitoring capabilities to detect changes in customer risk profiles, identify behavioral anomalies, and ensure sustained compliance throughout the customer lifecycle.
By leveraging KYC Hub’s integrated platform, gambling operators can effectively combat fraud while providing seamless experiences for legitimate players, maintaining regulatory compliance across all operating jurisdictions, and protecting their businesses from financial and reputational damage.
Online gambling fraud represents a significant and evolving threat to operators, players, and the industry’s integrity. As fraud techniques become increasingly sophisticated, leveraging advanced technologies like artificial intelligence, comprehensive identity verification, and behavioural analytics has become essential rather than optional. The complex regulatory landscape demands that operators implement robust compliance programs that meet both local requirements and international standards set by organisations like FATF. As the industry continues to grow, those who invest in comprehensive fraud prevention strategies will be best positioned for long-term success.
AI in fraud detection uses machine learning and real-time monitoring to identify financial crimes...
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