All-In one Fraud Prevention: Adapting to Evolving Fraud Risks In the Gaming Industry

The gaming industry is facing a crisis. Fraud is on the rise, with a staggering 64% increase from 2022 to 2024. This surge has resulted in $1.2 billion in losses for mobile casinos and betting platforms worldwide between 2022 and 2023 alone, according to Statista.

This International Fraud Awareness Week, we unpack the major emerging online gaming fraud risks and take a look at fraud prevention for gaming companies.

Fraud prevention for gaming companies: it’s game on!

The consequences of fraud extend far beyond financial losses. Money laundering and regulatory fines are also significant threats, with the UK Gambling Commission recently imposing a hefty £9.4 million ($11.9 million) fine on 888 for failing to meet social responsibility and anti-money laundering standards.

The risks have never been higher for online gaming platforms. To protect their businesses, safeguard their customers, and avoid costly penalties, they must be proactive in identifying and combating the most dangerous fraud schemes. It's a high-stakes game, and failure is not an option.

Online gaming: emerging fraud risks in 2024 and beyond

Statista anticipates that in 2024, the revenue of the online gambling market is expected to exceed $100 billion. By 2029, the number of users is predicted to reach 281.3 million globally. The online gaming industry has experienced explosive growth and shows no signs of slowing down.

However, this growth has also made it a prime target for fraudsters, who are becoming craftier and more resourceful. Armed with the same technology as legitimate fraud fighters, but without the same ethical constraints, these criminals pose a significant threat to the industry.

Gaming fraud, like most online fraud, begins with a simple yet devastating act: identity theft. Once this initial line of defence is breached, fraudsters can unleash a barrage of attacks, including account takeovers, bonus abuse, credit card fraud, and collusion. Armed with advanced technology, they can even deploy bots to gain an unfair advantage in games.

This pervasive threat touches every aspect of the online gaming industry, from player registration to withdrawals. These nimble criminals continually evolve, employing both advanced technology and social engineering tactics to evade gaming industry fraud detection security measures.

Adapting to evolving fraud risks: trends in online gaming fraud

1.    Account hijacking remains a persistent threat. Once they have control of an account, hackers can steal in-game items, currency, or personal information. Cybercriminals use various tactics to gain unauthorised access to player accounts, including:

• Phishing: Sending deceptive emails or messages that trick players into revealing their login credentials.
• Keylogging: Using malicious software to record keystrokes and capture login information.
• Brute force attacks: Using automated tools to guess usernames and passwords.

2.    In-game currency theft is a common target for cybercriminals. Popular methods include:

• Hacking: Exploiting vulnerabilities in game servers or client software to manipulate in-game currency.
• Botting: Using automated scripts to perform repetitive tasks within a game, such as farming or trading, to acquire large amounts of in-game currency.
• Scams: Tricking players into trading valuable items or currency for worthless ones.

3.    Gambling addiction can lead to financial difficulties and even criminal behaviour. Online gaming platforms, especially those that offer real-money gambling, can be vulnerable to exploitation by individuals struggling with addiction.

• Money laundering: Addicts may use online gaming platforms to launder money obtained through illegal activities.
• Identity theft: Addicts may be more likely to fall victim to phishing scams or other social engineering attacks, leading to identity theft.

4.    Deepfakes, manipulated media created using AI, pose a growing threat to online gaming. This can be used to:

• Create false evidence of cheating: Deepfake videos can be used to make it appear as though a player is using hacks or cheats.
• Impersonate game developers or customer support: Fraudsters can use deepfakes to trick players into revealing sensitive information.
• Spread disinformation: Deepfakes can be used to spread false information about games or gaming communities

A complicated relationship: regulatory constraints and online gaming

The regulatory landscape varies widely across different jurisdictions. While some regions, like New Jersey, have legalised online gambling, others, such as New York, have imposed restrictions. Accurate geolocation is crucial to ensure that players are complying with these regional laws and only accessing games where permitted.

Age verification is another critical aspect of online gaming regulation. Most jurisdictions have age limits in place to protect minors from harm. Accurate identity verification is essential to ensure that players meet these age requirements and prevent underage activity.

Know Your Customer (KYC): a critical challenge in online gaming

The online gaming industry faces a unique difficulty in verifying the identities of its customers. With operations spanning multiple jurisdictions and handling vast volumes of online transactions, gaming companies must navigate a complex regulatory landscape while ensuring the integrity of their platforms.

To address these challenges, many gaming companies have adopted advanced Know Your Customer (KYC) measures. By transitioning from traditional document-based identification to biometric verification and liveness detection, they have significantly enhanced their ability to verify customer identities.

However, fraudsters have not remained idle. The emergence of stolen, synthetic, and even deepfake identities has tilted the odds back in their favour. Criminals leverage artificial intelligence, automation, and machine learning to circumvent the security measures and fraud detection tools implemented by gaming companies.

A 360° view of identity: combating online gaming fraud risks

To effectively combat fraud in online gaming, companies must look beyond traditional identity verification methods. By analysing and connecting all relevant data points, gaming platforms can gain a deeper understanding of their customers and identify suspicious activity.

Fraud risk management strategies: the four pillars of identity

Practically speaking, a comprehensive identity verification process examines four key pillars:

Considered in isolation, each pillar is insufficient to identify fraud. For this, it is essential to analyse how each element interacts and correlates. By understanding the relationships between a customer's personal information, account history, transactions, and device usage, gaming companies can uncover hidden patterns and identify suspicious activity.

The battle intensifies with shared fraud consortium data

The fight against fraud is ongoing, with criminals constantly evolving their tactics. To stay ahead of these threats, gaming companies must adopt a comprehensive approach to identity verification and leverage advanced technologies and future-proof fraud tools.

A vital element in this battle plan is access to shared fraud consortium data. This vast repository of current and historical identity data provides valuable insights into the activities of fraudsters. Analysing this data using powerful AI and machine learning tools will allow gaming corporations to gain a deeper understanding of customer behaviour and identify potential risks.

Since fraudsters often operate in syndicates and target multiple victims across jurisdictions, shared fraud consortium data is essential for effective prevention. By pooling resources and sharing information, industry players can more effectively detect and disrupt fraudulent activities.

Tired of grappling with fraud and identity theft in your online gaming business?

TransUnion® offers a comprehensive suite of solutions designed to protect your platform and enhance customer experiences. Our scalable, robust, and comprehensive fraud detection and identity verification solutions leverage extensive datasets and future-proof fraud tools to:

• Reduce fraud losses: Safeguard your revenue and protect your brand's reputation
• Enhance customer experiences: Provide a seamless and secure gaming environment.
• Drive business growth: Build trust and foster lasting relationships with your players.

Ready to join the fight against fraud? Contact TransUnion on DOKenya@transunion.com today to learn more about how our solutions can help power up your gaming business.