How to make fraud prevention strategies work

Fraudsters follow the money – so it is little surprise that the igaming industry has found itself to be an increasingly appealing target for criminals in recent years.

Last year, in Europe alone, gross revenue in the igaming industry topped €123.4 billion (£104 billion/$137 billion), while in the US, annual gaming revenue grew for a fourth consecutive year in 2024 to $71.92 billion – up 7.5% year-on-year.

While regulatory changes in countries such as Brazil are helping to drive the industry’s ongoing expansion, increasing online and mobile accessibility is also fueling growth. More than two-thirds of the planet’s inhabitants now have access to the internet – up 144 million year-on-year – and there are now 5.81 billion unique mobile phone subscriptions worldwide, accounting for more than 70% of the world’s population.

However, such technological development is also driving fraud in igaming, as well as other industries – and the scale of the issue is mind-boggling.

In the UK, fraud accounts for more than 40% of all crime, according to the latest National Crime Agency figures.

The internet is the primary domain for such crimes. In the US, the FBI’s Internet Crime Complaint Center notes that it received around 2,000 complaints per month when it launched 25 years ago. Over the past five years, it has averaged more than 2,000 complaints every single day, with the acceleration of digital transformation through the Covid-19 pandemic exacerbating the challenge.

Whilst many of these complaints relate to consumer-facing issues, online fraud is also on the rise for businesses – and fraud in igaming is becoming an increasingly acute challenge for operators.

Nearly half of European igaming platforms believe fraud cost them more than 10% of their revenue last year. A further 15% put the figure at more than 20% of their total revenues, with 83% of operators claiming the issue had grown year-on-year.

For these reasons, there is a recognition across the industry that igaming fraud prevention strategies need to move beyond standard anti-money laundering (AML) and Know Your Customer (KYC) verification guidelines, for the good of the sector’s companies, as well as consumers.

Key igaming fraud issues

For operators in the industry, fraud has traditionally comprised a multi-pronged threat. However, the outlook has become increasingly complex, with tech-savvy individuals as well as organized criminals becoming increasingly adept at exploiting weaknesses in digital systems.

Bonus abuse is one of the most prevalent types of fraud – when users exploit promotional offers meant for others – while affiliate fraud involves referral programmes being manipulated to generate illegitimate earnings. Account takeovers, when bad actors gain unauthorised access to a user’s account, is another established problem, while internal fraud, payments fraud and SMS fraud are also issues that operators encounter.

Money laundering is also a common type of fraud. It involves depositing illicit funds into an igaming account before typically placing low-risk bets and withdrawing the winnings.

Moreover, the increasing prevalence of artificial intelligence (AI) and deepfake technology to circumvent verification processes are providing a new headache – and a new strand to an evolving issue.

In April, the UK’s Gambling Commission issued an update, warning of the prevalence of AI deepfakes connected to money laundering and organised crime. To illustrate the challenge, in the same month, an AI-generated video purporting to show technology presenters at UK broadcaster Sky News promoting illegal gambling apps was widely shared across social media.

The AI challenge – and opportunity

Against this backdrop, the advent of artificial intelligence is providing a challenge, but also an opportunity in the field of fraud detection and prevention.

Last year, the UK’s Joint Money Laundering Intelligence Taskforce issued an amber alert on the use of AI to bypass customer due diligence checks.

However, AI is also being increasingly adopted to tackle the evolving problem, both inside and outside igaming.

For example, nearly three-quarters of financial institutions now use AI to tackle the growth of so-called Fraud-as-a-Service. Around seven in 10 top executives in the financial sector believe AI will drive more revenue through detection and prevention rather than losses due to AI-enabled fraud, despite the danger of the technology automating, augmenting and scaling up criminal activity volumes.

A proactive anti-fraud approach

Anti-fraud platform Frogo, which launched at ICE Barcelona in January, is one such service that combines advanced tools to address the issue in a proactive fashion.

The all-in-one platform features device fingerprinting to analyse and detect suspicious activity, a scoring engine that utilises static and dynamic triggers to assess risk in real time, an AI module to continuously learn from fraud patterns and adapt to emerging threats, and graph-based forensics that map out relationships between accounts to identify fraud rings and collusion.

Real-time fraud detection is essential for reducing losses and maintaining customer trust. With AI monitoring every transaction as it happens, operators and providers can act quickly to eliminate it and prevent further fraudulent activity.

Indeed, as Frogo outlines, the goal is to ‘detect and stop fraud before it even starts’

“The idea – staying one leap ahead of every threat – has shaped the way we think, plan, and build. It’s not just a phrase or slogan, it’s a habit we’ve developed,” says Volodymyr Todurov, chief executive officer of Frogo.

“The idea – staying one leap ahead of every threat – has shaped the way we think, plan, and build”

Through anomaly detection algorithms, AI can detect patterns like unusual deposit and withdrawal behaviour or a sudden geographical change from one account, for example. Powered by rich data and machine learning, over time the AI will refine techniques to tackle igaming fraud, and will play a vital role in a more holistic approach.

Layered fraud detection

An example of this more joined-up strategy is the implementation of layered detection methods, which are increasingly seen as vital tools in the fight against igaming fraud.

This layered detection can take the form of device intelligence, which identifies collusion and may correlate with further bonus abuse; IP fraud scoring, which flags up suspicious activity; digital footprint analysis, which analyses indicators to spot risky accounts; and behavioural biometrics and velocity checks to identify unusual patterns.

This means that those who do manage to bypass initial fraud monitoring checks will continue to undergo rigorous – but frictionless – analysis across the gambling experience to ensure illegal activity is detected and acted upon.

It should be noted that more than three-quarters of European igaming operators claim that fraud occurs after customer onboarding, with identity fraud, money laundering and bonus abuse cited as the biggest threats by around two-thirds of such businesses.

Verification should therefore be viewed as more than merely an initial hurdle to be cleared, with continuous monitoring not only enhancing security, but also maintaining compliance, helping to prevent account takeovers and fraudulent transactions.

Such an approach will also reduce operational strain, empowering operators to allocate resources towards high-risk threats rather than playing whack-a-mole with a multitude of low-value cases.

Fraud dangers in igaming

The dangers of ignoring the early warning signs of fraud can lead to irreversible damage – and not just from a short-term financial perspective. In a highly competitive industry, reputational harm can be challenging to shake off, while legal and regulatory sanctions due to anti-money laundering failures, for example, are a common occurrence.

While there is a broad realisation that conventional fraud-prevention strategies that involve manual work can prolong the reaction time by several days before damage becomes noticeable, platforms like Frogo acknowledge that many of their potential clients do not have established anti-fraud processes in place, and some are just beginning their journey.

“We believe the very nature of this field demands flexibility. That’s exactly why we’ve built our platform so its tools can be tailored to the unique needs of each business.”

For that reason, the platform provides training in the fundamentals of fraud prevention, as well as assistance in building risk management processes from scratch to ensure a joined-up approach from the outset.

Frogo focuses on identifying bonus and financial fraud, multi-accounting, internal fraud, affiliate programme abuse, financial fraud and SMS fraud. The platform is also customisable for specific requirements, recognising evolving challenges.

“We believe the very nature of this field demands flexibility. That’s exactly why we’ve built our platform so its tools can be tailored to the unique needs of each business.

“It is highly adaptable – empowering teams to create, customise, and update fraud detection rules in real time, helping them stay ahead of threats while meeting evolving operational demands” Todurov explains.

This adaptable approach will be crucial for addressing igaming fraud of the future.

Whereas operators have previously relied on a reactive approach, the financial, reputational and regulatory benefits of a proactive strategy through AI-driven technology will be essential if they are to stay one step ahead of the criminals.