How does Bonus Abuse Fraud Work in iGaming and How to Prevent It?

• Post author By Adam Mendas
• Post date June 17, 2024
• Category Fraud

The iGaming industry, encompassing online casinos, sports betting platforms, and poker rooms, uses a wide range of bonuses to attract and retain players. These bonuses come in various forms such as welcome bonuses, no-deposit bonuses, free spins, and loyalty rewards.

What is Bonus Abuse Fraud?

Every single casino out there offers these promotions as they help get new users in the door. However, they also attract fraudsters who exploit these bonuses. 

Understanding how bonus abuse fraud works and implementing effective prevention strategies is crucial for maintaining a fair and sustainable gaming environment.

1. Multiple Account Fraud (MAF)

Fraudsters usually create multiple accounts using fake identities or stolen information to claim bonuses multiple times. Not just that, fraudsters also use VPNs, temporary email addresses, and virtual phone numbers to bypass detection.

This leads to inflated acquisition costs for the operator and disrupts the integrity of the gaming platform.

2. Collusion

Collusion fraud happens when a group of players work together to exploit bonuses offered by Casinos. This is especially common in games like poker. Once they start playing, they coordinate their bets to minimize losses and maximize winnings. In the end, they steal a lot of money from casinos and transfer all the bonus funds to a single account.

This undermines fair play and can lead to significant financial losses for the platform.

3. Arbitrage Betting

Players take advantage of differences in odds between different betting sites or within the same site to place bets that guarantee a profit regardless of the outcome. This is often done using bonus money.

While not illegal, arbitrage betting can skew the risk calculations of the platform, leading to unintended financial exposure.

4. Value Betting:

Players identify bets with positive expected value, typically using bonus funds, to exploit the promotional offers. This is more common in sports betting. Persistent value betting can lead to sustained losses for the operator if not managed properly.

Strategies to Prevent Bonus Abuse Fraud

1. Robust KYC (Know Your Customer) Processes

Ensure thorough verification of user identities using advanced KYC tools. This includes verifying documents, checking for duplicate accounts, and using biometric verification where possible.

Helps in detecting and preventing the creation of multiple accounts by the same individual.

2. Behavioral Analysis and Machine Learning

Use machine learning algorithms to analyze player behavior and detect patterns indicative of fraud. For instance, rapid bet placement, identical betting patterns, and simultaneous logins from multiple accounts can be red flags.

3. Geo-location Tracking

Utilize geo-location technologies to track the physical location of players. Ensure that players are not using VPNs or proxies to mask their true location. Prevents fraudsters from creating multiple accounts from different locations to claim bonuses.

4. Dynamic Bonus Structures

Design bonuses that are dynamic and tailored to individual player profiles rather than one-size-fits-all. Include wagering requirements that scale with player activity and behavior. Reduces the attractiveness of bonuses to potential fraudsters while still rewarding genuine players.

5. Limitations and Monitoring

Set limits on bonus eligibility, such as capping the number of bonuses a player can claim in a certain period. Continuously monitor for unusual activity and adjust limits as needed. Monitoring prevents abuse by limiting the potential gain from fraudulent activities.

6. Collaboration and Information Sharing

Join industry groups and share information about known fraudsters and emerging fraud tactics. Collaborative databases can help identify repeat offenders across different platforms. Information sharing among platforms enhances overall industry defenses against bonus abuse.

Conclusion

Bonus abuse fraud is a persistent threat in the iGaming industry, but it can be effectively mitigated with a combination of technology, strategic planning, and industry collaboration.