Month: July 2021

What is fraud prevention and management? 

Fraud prevention and management is a strategy to detect and minimise illegal activities and abuse that may cause financial or brand reputation damage for igaming operators. Igaming includes sports betting, online casinos, online poker, esports betting, horse racing wagering and ilottery. Bettors use many different fraudulent strategies against igaming operators, including promotional abuse from multi-accounting (the practice of registering multiple betting accounts to maximise profits), stolen credit cards, identity theft, fraudulent chargebacks and more.

What are some of the current challenges that igaming operators are having with fraud prevention and management?

First, promotional abuse from multi-accounting. Igaming operators are typically focused on rapid account acquisition, and many offer large incentives, such as risk-free bets and deposit matches, for creating a new account. Fraudsters know this and create new accounts to take advantage of numerous promotions, which further exacerbates the problem. With multiple accounts, they believe they can increase their chances of winning by betting both sides of the same game with the promotional money. The fraudster may even share a percentage of the winnings with any accomplices for a percentage of their winnings in return.

Second, stolen credit cards and identity theft. Some industries that conduct business online with card-not-present (CNP) transactions experience fraudulent payment problems. Fraudsters can easily purchase stolen credit cards on the dark web and use those to play. This is often not discovered until a chargeback comes through, sometimes months later. It is also very easy for fraudsters to create fake accounts with stolen identity information. Most of the information required to create an account is easily obtained: name, address, date of birth, etc. According to Forbes’ May 25, 2020 article Your Social Security Number Costs $4 On The Dark Web, anything else can also be purchased online for just a few dollars. With over 20 states regulating online sports betting, the use of stolen identities to create accounts may become easier and more profitable. In the US, sports betting is growing and becoming more popular, and the expectation is that igaming operators may consider implementing additional fraud prevention and management measures and tools that are used by financial intuitions, such as enhanced KYC (know your customer) regulations, reputational databases and device checks.  

Third, chargebacks: Another common problem for igaming operators is buyer’s (or in this case bettor’s) remorse — also known as “friendly fraud”. The customer makes a deposit to their account, loses their money, regrets it, and disputes the charge with their bank. This is problematic and can be difficult to prove. The other chargeback issue facing igaming operators is legitimate chargebacks as a result of stolen identities. The legitimate cardholder sees the surprise charge on their statement and submits a dispute. Since operators aim to balance user experience against loss risk, it can be a losing battle. They want to accommodate valid customers with certain perks, but this can leave them open to fraud – and the fraudsters know how to exploit this. By enhancing their upfront fraud controls, igaming operators can potentially minimise the incidence of hostile chargebacks and may win friendly fraud disputes by using a platform that helps them prioritse and standardise their chargeback process. As more states begin to offer online gaming, we may see this problem continue to grow, so it is important to get ahead of it. 

How can igaming operators improve their fraud prevention and management processes, and what are some of the key benefits?  

Fraudsters follow the money. According to Kaspersky’s post Online Gaming Scams during Pandemic. How to Stay Safe, fraudsters have set their eyes on the online gaming industry. For igaming operators thinking about how to protect their businesses, they should consider deploying the following: 

• A proven fraud prevention and management platform that uses both machine learning and rules-based approaches to gauge the riskiness of every transaction.
• A device intelligence solution that provides visibility to all devices accessing and creating accounts. Seeing that one device has accessed several accounts or that a device located in a foreign country is trying to create an account with a US address can be warning signs. 
• Use of behaviour analytics to evaluate if a person or a bot is behind a transaction. As fraudsters become more sophisticated, they create bots that mimic human behaviour. But sophisticated fraud prevention solutions can tell the difference and flag those transactions immediately. 

With the necessary tools in place, igaming operators can reduce fraud as they scale to take advantage of all the growth opportunities in the online gaming industry.

A wholly owned subsidiary of American Express, Accertify is a leading provider of fraud prevention, digital identity, device intelligence, chargeback management, and payment gateway solutions to customers spanning diverse industries worldwide.

The ads in question first appeared on Dutch television on 25 May and featured a number of players selected as part of the country’s squad for the Uefa European Championships, which began on 11 June and runs to 11 July.

The advert was then broadcast on a number of channels in various forms.

Article 4 of the Dutch Gambling Act states that licensed operators must not use professional athletes or a team of professional sports players to promote gambling in the country, as per a new regulation which came into effect in February this year. 

As such, the KSA contacted Staatsloterij on 31 May to outline its concerns over the advert and request it be removed immediately. Staatsloterij was given until 2 June to respond to the order.

However, also on 31 May, KSA noted that another part of the advertising campaign was added after it had spoken to Staatsloterij about the breach of the Gambling Act.

In response, the KSA on 3 June agreed to impose a charge on Staatsloterij over the breach and published details of the violation on certain social media channels to make consumers and other operators aware of the case.

However, the KSA granted Staatsloterij a period of grace until 7 June to withdraw the advert or edit out the players so the ad could continue to run without breaching regulations. Staatsloterij responded by removing the players so that they no longer featured in the advert.

Had the lottery failed to take action, it faced a penalty of €100,000 (£85,953/$118,425) for each day the advert appeared after the grace period, up to a maximum of €3.5m.

“An objective of the games of chance policy is to prevent vulnerable groups, including young people, from coming into contact with games of chance,” the KSA said. 

“Young people are especially vulnerable to developing addictions, including gambling addiction. This can lead to problems at a young age, but also later in life. 

“For this reason, role models other than professional athletes should not be used if they have a substantial reach among young people or if they themselves are younger than 25.”

Novel coronavirus (Covid-19) restrictions in the UK meant land-based casinos, bingo halls and adult gaming entertainment centres were forced to close from 5 January until 17 May.

Similarly in Spain, Rank’s Enracha venues remained closed from early on in the year until the end of May, when measures were eased by the country’s government.

Since the reopening of UK venues, average weekly like-for-like net gaming revenue (NGR) at Rank’s Grosvenor venues was £5.5m (€6.4m/$7.6m), down 17% on the same period in 2019, but ahead of the £4.2m weekly figure it needed to break even.

Rank noted that outside London, like-for-like NGR in venues was close to 2019 levels. In London, however, NGR was 38% lower due to a lack of international tourism, reduced numbers of office workers in the city and the ongoing late night travel challenges for consumers.

Turning to the Mecca bingo halls, average weekly like-for-like NGR amounted to £2.5m in the six-week period, down 20% from 2019 and only just ahead of the £2.5m a week needed to break even.

Rank noted that trading Mecca was strongest in venues where it has trialled elements of a new proposition including enhancements to its main stage bingo game.  

The operator said it expects trading in the UK to continue to improve as social distancing and international travel restrictions are eased, as well as when the 10:30PM curfew is removed in Scotland.

In Spain, average weekly like-for-like NGR for Rank’s Enracha venues stood at £500,000 in the six-week period, 34% lower than 24% but ahead of the £400,000 average weekly breakeven point.

Rank said trading in the country improved as regional restrictions on capacity limits and opening hours were gradually relaxed. 

In terms of digital Rank said that the performance of its entire digital business in the fourth quarter is expected to be at the same levels seen in the second and third quarters of its financial year, which ended yesterday (30 June).

Taking all this into account, Rank said it will comfortably meet its £50m minimum liquidity test at by the end of its financial year and also expects to continue to meet all future liquidity and financial covenant tests.  

Meanwhile, Rank also provided an update on an historic VAT tax related to income on slot machines at its venues.

Yesterday, First-Tier Tax Tribunal ruled in favour of Rank on its claim to be refunded VAT paid on slot machine income in the period from April 2006 to January 2013.  

HMRC has 56 days to lodge an appeal, while the two parties also have 56 days to agree the exact quantum of the claim; Rank expects that the value will be materially in line with its previous estimate of approximately £80m.