The global online gambling market was estimated to be worth $65.53 billion in 2022 and is predicted to grow by 190% within a decade, with the EMEA region leading the charge with an 11% expected growth by 2029. The rapid opportunity for growth has been hindered by an equal increase in security risks. Between 2019 and 2021, iGaming global fraud grew by 68.6%.
Cybercriminals are on a constant lookout for opportunities to commit fraud in online gaming industry environments and some are even turning to AI to outsmart traditional safety systems. The ongoing threat is compounded by the rapid rise of regulations across EMEA. As a result, iGaming operators are faced with addressing an expanding number of vulnerability points along the player journey while also adjusting to a complex landscape of external requirements.
Read on to discover the most common risks of online gaming and how you can take practical steps to protect your company, prioritize VIP players, and accelerate your growth.
What are the top 5 types of fraud in the iGaming industry?
Understanding the threats you face is the first step towards being able to prevent them. Here are the top 5 security threats that every iGaming operator needs to prepare for:
Payment fraud
Financial loss for businesses and users is certainly one of the biggest concerns when it comes to iGaming. Cybercriminals will target financial transactions and exploit any vulnerabilities in your payment system with various types of payment fraud, including:
- Card-not-present (CNP) fraud: Cybercriminals use stolen card information to make purchases where the physical card is not needed, such as online or within apps. This is the most common form of payment fraud.
- First-party fraud and chargebacks: Customers who have lost money gambling may claim credit or debit card transactions were made without permission and request refunds from their bank.
- Phone top-up abuse: Fraudsters can use phone credit or prepaid cards to bypass gambling regulations or use social engineering and phishing to scam other players into transferring phone payments to them.
Account takeovers and phishing
Personally Identifiable Information (PII) needs to be provided for identity verification when gambling online. Fraudsters often seek unauthorized access to users’ personal information and payment details for immediate financial gain or identity theft. Two common ways cybercriminals achieve this are via:
- Account takeovers: A fraudster can use a legitimate customer’s account details to log in and alter verification information, take control of the account, and use the funds for their own purposes.
- Phishing: Scammers send messages or emails impersonating banks or companies to trick individuals into providing personal information. The scammer then uses this to access their accounts.
Gnoming and bonus abuse
Promotions are an effective way to entice new customers, but they can be misused by bad actors and the cost to your business can quickly mount up. In a practice known as ‘gnoming’, fraudsters set up dozens or even hundreds of fake accounts to repeatedly exploit signup offers, coupons, or free gifts. They can also use gnoming to get around account restrictions due to previous bad behavior or self-exclusion.
Chip dumping
This is a money laundering technique where one player deliberately loses chips to another as a way to transfer funds outside normal payment systems.
Affiliate fraud
Cybercriminals may manipulate marketing techniques such as pay-per-lead (PPL) or pay-per-click (PPC) campaigns to generate fake leads or sales. A related risk is typosquatting where fraudsters register domains that resemble official names and profit from illegitimately referred clicks.
The compounding challenge of EMEA regulations
Operators in EMEA hit by fraud not only suffer in terms of lost revenue, but may also face claims for damages or penalties from regulators. Added to this is the cost of reinforcing security against future attacks.
In the iGaming sector, data breaches pose a significant threat as they can expose players’ personal and financial information, costing operators an average of $3.1M per data breach. Players expect high levels of security, so losing control of this data damages player trust and brand reputation.
Online casinos are subject to strict regulations and operators face legal consequences, fines, or loss of license if a breach stems from failure to adhere to gambling, data protection, or anti-money laundering laws.
The compliance landscape in iGaming
Your security measures can also be affected by the differing compliance regulations across various online gambling jurisdictions. This legislation usually dictates compliance obligations for all stakeholders and can stipulate game rules, marketing strategies, and IT infrastructure requirements. Below we outline some particular compliance regulations in EMEA:
UK
- Licensing is managed by the UK Gambling Commission (UKGC).
- The licensing process is extensive and there’s a high tax rate on remote gaming revenue.
- Operators must adhere to strict standards of transparency, fairness, and responsible gambling.
- Strict customer identity verification is required.
- Operators must enforce robust anti-money laundering measures.
- Advertising standards are set by UKGC.
- RNG’s (random number generators) are required to be tested and certified.
- Every iGaming server must be physically and technically secure.
- Compliance audits require operators to keep and secure records of every significant event such as financial transactions and errors.
- Back-ups of data must be made frequently and stored securely.
Malta
- Malta Gaming Authority (MGA) oversees licensing and regulation.
- The integrity of regulatory data, including transaction logs and gaming functionality must be ensured.
- Malta requires strict anti-money laundering and Customer Due Diligence procedures.
- Measures to ensure the protection of players, including responsible gaming tools, are required.
- Personal, gaming, and financial data records must comply with data protection rules and information security standards and be accessible at all times.
- Details of all hardware, networks, and virtual machines, IP addresses, geographic locations, and addresses of premises must be provided.
The Netherlands
- Licensing is regulated by the Ksa (Kansspelautoriteit).
- Operators must adhere to the Remote Gambling Act.
- Operators have an “active duty of care” and must provide methods for player protection, including age verification, and responsible gaming tools.
- Operators are obliged to check whether players are registered in the Cruks system which lists people excluded from access to casinos.
- All electronic means used for the organization of licensed games of chance must be located in an EU/EEA jurisdiction and a control database must be located in the Netherlands.
Germany
- Licensing is overseen by the German Interstate Treaty on Gambling (ISTG), but online gaming is up to the federal states.
- Overall, Germany has strict requirements for operators, such as player protection, advertising restrictions, taxation, and payment processing.
Ireland
- Licensing is run by the Irish Revenue Commissioners.
- Operators must have anti-money laundering and Customer Due Diligence procedures in place.
- Operators must submit regular compliance reports proving they are following the Betting Act of 2015.
- Current laws do not specifically refer to online gaming. However, new legislation that will cover iGaming is currently being prepared.
Closely behind the EMEA region, the U.S. is also a fast-growing iGaming market and faces a diverse set of regulatory requirements.
U.S.
- Compliance is regulated at the state level. In many states, the status of internet gambling is unregulated and uncertain. In several states, including Nevada, Pennsylvania, and New Jersey, online casinos and poker are legal. In others, such as California and Florida, all types of online gambling are banned.
- The Unlawful Internet Gambling Enforcement Act (UIGEA) forbids gaming operators from willfully receiving payments related to illegal online gambling. UIGEA doesn’t specify what legal or illegal gambling is, delegating that responsibility to each state.
- The Illegal Gambling Business Act (IGBA) is aimed at extensive gambling operations, including online, that violate state laws.
- The Indian Gaming Regulatory Act (IGRA) regulates gaming operations on Native American lands.
Eliminate the risks of iGaming with Sift
Trusted by some of the biggest brands in iGaming, Sift’s AI-fueled fraud prevention solution is helping operators meet these unique challenges while enabling faster growth and better player experiences. Built in partnership with iGaming experts, Sift offers solutions tailored to the specific needs of iGaming, resulting in industry-leading iGaming benchmarks, including a 0.5% average player block rate and 60% reduction in manual review for Sift customers.
Sift’s custom iGaming solutions are backed by a global AI-powered fraud detection network to help operators stay one step ahead of fraudsters who leverage underground networks across EMEA and wider regions.
Highly flexible automation templates designed in collaboration with iGaming industry leaders helps take the guesswork out of player journeys and ensures VIPs enjoy a frictionless experience and seamless payouts.
To capitalize on the high use of alternative payment method (APM) automation in the EMEA region, iGaming operators also use Sift to easily incorporate a variety of payment services including digital wallets, SEPA payments, and ACH systems.
Find out more about why Dustin Cooper, Chief Financial Officer and Chief Operating Officer, of one of the fastest growing Fantasy Sports operators, believes a “partnership (with Sift) will help further ensure players can trust that Underdog will give them a fun, fair, and secure environment to increase their enjoyment of sports.”