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The high-stakes world of gambling has long been synonymous with the allure of beating the house, an age-old tale that continues to captivate enthusiasts and opportunists alike. Despite the adoption of advanced fraud prevention, verification, and payment risk management tools within the gambling sector, the industry grapples with a persistent challenge – bonus abuse. This issue, costing the industry billions, remains an ongoing concern, with fraudsters adeptly exploiting vulnerabilities in existing security measures.
In the eyes of Ozric Vondervelden, co-founder of Greco, the gambling industry's reliance on regtech tools raises questions about their efficacy in curbing bonus abuse. The allure of outsmarting the industry, often romanticized in Hollywood blockbusters like Ocean's Eleven, contributes to a moral ambiguity surrounding bonus abuse. Vondervelden notes that even when faced with the question, "What do you do for a living?" responses often reflect an intrigue with the ingenuity of fraudsters who manage to outsmart the industry, perpetuating a narrative akin to a modern-day Robin Hood.
The Challenges of Security Defenses
The gambling industry has implemented various security defenses, including device fingerprinting, to counter bonus abuse. However, Vondervelden argues that these measures have limitations, as demonstrated by research in New Jersey. In some instances, a single identity exploiting every welcome offer could yield profits upwards of $18,000. Fraudsters, according to Vondervelden, can scale this across multiple identities by utilizing unique devices and IP addresses for each identity, presenting a significant challenge for traditional security defenses.
Device fingerprinting, while a common security defense, falls short in preventing bonus abuse effectively. The research findings suggest that fraudsters can easily scale their activities by employing unique devices and IP addresses for each identity. This method allows them to exploit welcome offers and accumulate substantial profits. Moreover, the additional cost of the hardware required to implement such tactics poses a minimal dent in their earnings.
Vondervelden emphasizes the complexities faced by the industry in striking a balance between robust verification processes, ensuring minimal user friction, and controlling costs. While background verification with minimal user friction is an appealing option, it remains vulnerable to scraped and stolen data. In the UK, publicly available data on the Companies House register provides the necessary information for thousands of verifiable casino accounts, making background verification susceptible to exploitation.
The Use of Virtual Cards and Digital Wallets
The landscape of payment-based risk management in gambling has undergone significant changes with the introduction of digital wallets and virtual cards. Previously, the unique payment card requirement served as a formidable barrier against multi-accounting. However, digital wallets like PayPal, Apple Pay, Neteller, and Skrill have eased the creation of multiple accounts linked to a single wallet.
Virtual cards, a relatively recent addition to the payment arsenal, have further complicated the issue. Users can generate hundreds, if not thousands, of unique card details for a single wallet, posing a challenge for operators attempting to curb bonus abuse. The identification codes (BINs) of virtual cards often overlap with those of physical cards, making it difficult to block them without potentially alienating a significant customer base.
Addressing the dilemma of blocking virtual cards involves considering the identification codes (BINs) they use, which may overlap with those of physical cards. However, taking a broad approach by blocking all cards from specific providers, such as Monzo and Revolut, could alienate a substantial customer base and contradict the trends in banking innovation and consumer privacy demands.
The Challenge of Syndicates
Bonus abuse is not only a solitary endeavor; syndicates play a crucial role in scaling these activities. A ringleader recruits individuals to exploit bonuses, providing guides on how to navigate each offer while taking a cut of the proceeds. The challenge with this setup is that each player within the syndicate uses their own device, IP address, cookies, browser, geographical location, payment method, and Know Your Customer (KYC) documents, leaving behind minimal traceable correlations.
Finnish bonus abusers have adopted a particularly elusive strategy in response to open banking, making them notoriously difficult to catch. With operators facing financial challenges and some going bust due to open banking, bonus abusers adapted their processes. A similar challenge is emerging in the US in response to geolocation tracking.
The Technological Arms Race
Vondervelden describes the current state of affairs as a "technological arms race" between fraudsters and the security measures employed by the gambling industry. Advances in artificial intelligence (AI) have presented new challenges, with fraudsters using AI to animate still images and bypass costly liveness checks, considered one of the most secure defenses.
This constant back-and-forth between AI-driven tactics by fraudsters and security measures implemented by operators creates an ongoing challenge, with security measures frequently being outsmarted. The evolution of technology introduces a dynamic element to the landscape, requiring the gambling industry to stay ahead of emerging threats continually.
The Role of Gameplay Analysis
While risk solutions are deemed necessary, Vondervelden contends that none of them currently provides a comprehensive solution. Those relying solely on existing tools to address bonus abuse may find themselves exposed. Vondervelden argues that in high-bonus markets, a complete solution necessitates a combination of device fingerprinting, verification, payment analysis, and gameplay analysis.
Notably, gameplay analysis stands out as a crucial factor that cannot be easily spoofed and acts as a failsafe. If a player is taking value, they are taking value; if a player is cheating, then a player is cheating. However, the challenge lies in operators' capability to distinguish these aspects effectively. Vondervelden highlights that many top-tier operators can be exploited for over 12 months on a single account, incurring costs of thousands before identifying the abuse – often too late to mitigate the impact.
Breaking Down Silos Between Risk and CRM Teams
To address the multifaceted challenge of bonus abuse, Vondervelden advocates for breaking down silos between risk teams and customer relationship management (CRM) teams within gambling operators. He emphasizes that VIPs and bonus abusers exist at two ends of the same value scale. By enhancing collaboration and communication between these traditionally separate teams, the industry can better analyze gameplay risk and respond more effectively to emerging threats.
The Path Forward
As the gambling industry grapples with the complex issue of bonus abuse, there is a recognition of the need for innovative, industry-specific solutions. Vondervelden's critical examination sheds light on the limitations of existing regtech tools and the importance of evolving strategies to stay ahead of increasingly sophisticated fraud tactics.
The ongoing technological arms race requires the industry to adapt and innovate continually, leveraging a combination of advanced technologies and collaborative efforts across different operational teams. As the narrative of bonus abuse continues to unfold, operators face the challenge of finding a delicate balance between robust security measures, user experience, and operational costs to ensure the integrity and sustainability of the gambling ecosystem.
By fLEXI tEAM
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