The bad news is that this huge pool of money attracts all types of fraudsters and scammers looking to take advantage of the loopholes in the online betting industry. So, for betting websites, it becomes extremely important to invest in robust betting fraud prevention measures that can protect their business and customers from online gambling fraud.

A 262% Surge in Online Betting Frauds!

As per TransUnion, in the US alone, the rate of online betting fraud reached 262%, driven by high transactional volumes during COVID-19 lockdowns. With customers making deposits and withdrawals multiple times per day, spotting suspicious behavior among millions of transactions is more challenging than ever.

If you were scraping the internet for key information on online betting fraud, your research stops here! In this blog, we will discuss the different types of online betting fraud prevalent today and how online gaming business owners can protect themselves and their customers from these threats.

What is Online Betting Fraud?

In simple terms, online betting fraud entails risk for both players and betting establishments. Players risk losing their money or having personal data stolen; operators risk revenue loss, fines, reputational damage, and regulatory penalties.

Online betting platforms need to be aware of two types of fraud:

• Scammers outside the business seeking stolen cards, IDs, or account takeovers.
• Collusion or data theft by employees or contractors.

Understanding how fraudsters orchestrate these schemes is the first step in effective prevention.

Common Fraud Techniques

Gnoming (Multi-accounting)

Gnoming—also known simply as multi-accounting—occurs when a single individual creates and operates multiple betting accounts to exploit promotional offers and system loopholes. Fraudsters often use fake identities, VPNs or botnets to morph IP addresses and device fingerprints, making each account appear unique to the bookmaker’s systems. In matched betting scenarios, gnoming allows operators to guarantee profits by placing offsetting bets across their own accounts—sometimes even impersonating friends or family to bypass one-per-customer restrictions.

Chip Dumping Fraud

Chip dumping fraud happens when one account deliberately loses chips or credits to another—either a colluding partner or a secondary account under the same fraudster’s control—to transfer value covertly. In practice:

1. The fraudster sets up two or more accounts (often via VPN or Tor to hide connections).
2. During play, one account makes illogical folds or outsized bets to funnel chips to the other.
3. The “winning” account then cashes out or uses the chips to satisfy bonus-play requirements, effectively laundering illicit funds or harvesting promotional credits.

Bonus Abuse

Bonus abuse, also called promo abuse, is the repeated claiming of new-customer offers using multiple accounts, email addresses, or phone numbers. Fraudsters sign up repeatedly to collect free bets, deposit matches, or spins, then either cash out these credits directly or resell them on gray markets. Over time, this can drain an operator’s marketing budget and distort genuine player incentives.

Chargeback Fraud

Chargeback fraud arises when a customer disputes a legitimate gambling transaction with their bank or card issuer, claiming the wager was unauthorized to recover funds while keeping any winnings. Contributing factors include:

• Players who lose large sums contest valid charges instead of contacting customer support.
• Fraudsters use stolen cards to fund bets, then the real cardholder files a chargeback upon discovery.

What Can You Do as an Online Betting Business Owner?

Although we see an increase in online betting fraud in recent years, there are a few crucial steps casino operators can take to provide their customers with a safe and seamless experience.

Know-Your-Customer (KYC)

A robust KYC process begins at registration by requiring users to submit government-issued ID documents—such as a passport or driver’s license—and using automated document-scanning coupled with facial-recognition checks against a live selfie to verify authenticity. To comply with AML regulations and prevent money laundering, platforms should also collect proof of address and, for deposits exceeding predefined thresholds, proof of source of funds.

Age verification is critical: integrating a DOB check or third-party age-verification service ensures minors cannot register or wager. Device and IP fingerprinting further strengthen security by logging device characteristics and network information, which can then be matched against VPN or proxy lists to detect multi-accounting attempts.

Deploy Fraud Prevention Software

AI-driven fraud-prevention platforms analyze both transactional and behavioral data in real time, using machine-learning models to detect anomalies such as rapid chip dumping fraud or spikes in bet size that deviate from established norms. These systems build individual behavioral baselines—tracking factors like login times, bet types, and average stakes—and flag sessions that deviate significantly, triggering automated alerts for further review.

Risk-scoring engines then categorize accounts into tiers, enabling compliance teams to prioritize manual investigations where they matter most. Additionally, integrating with payment networks allows platforms to assign chargeback-risk scores before settlement, automatically challenging or blocking high-risk transactions to minimize financial losses and operational costs.

Embrace Responsible Gaming Tools

Implementing responsible-gaming features not only protects vulnerable players but also reduces overall fraud exposure and regulatory scrutiny. Configurable deposit limits (daily, weekly, or monthly caps) give players and operators control over spending thresholds, preventing rapid, high-volume transactions that often accompany fraud schemes. Time-out and cooling-off options enable users to take short-term breaks during which wagers and logins are disabled, curbing impulsive behaviors that fraudsters sometimes exploit.

Self-exclusion programs allow at-risk individuals to suspend or permanently close accounts, with the platform rigorously enforcing blocks on access and promotional communications. Real-time pop-up alerts can be configured to warn players when play patterns suggest chasing losses or other risky behaviors, linking them directly to support resources and self-assessment tools.

Wrapping up

Protecting your customers and bottom line means investing in end-to-end security—from thorough KYC checks and AI-driven fraud software to responsible gaming protocols. By staying vigilant against chip dumping fraud, multi-accounting, bonus abuse, and chargeback scams, you can turn fraud defense into a competitive advantage and keep your gaming community secure.

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