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Like Polyphemus in Homer’s The Odyssey, fraud is always looming over online commerce. A prominent form of fraud is the creation of synthetic identities with which bad actors can create accounts with online gambling companies and use them to commit myriad crimes.
Amid such activity, online gambling companies might feel trapped in a cave like Odysseus when it comes to liberating themselves from the constant threat. While the concern is absolutely legitimate, gaming licensees are not helpless.
Regulators and vendors can play the role of the flaming stake piercing the eye of the giant villain. Even with that assistance, though, online gambling companies must cling to the best practices leading the way out to safety. Failure to act in a timely manner will put gamblers and the entire regulated gaming industry in the United States in danger.
Synthetic identities pose constant threat to online gambling companies
The use of synthetic identities is similar to traditional identity theft but can be far more sophisticated. A synthetic identity, according to Equifax, “is a form of financial fraud in which a real person’s information, such as their Social Security number or date of birth, is stolen and combined with other falsified personal information to create a new identity.”
The primary purpose of this activity is to commit financial fraud. People will use the combination of fabricated and legitimate information to open bank accounts and obtain loans. Many times, the fraud happens over the course of years. When the person is satisfied, they simply stop using the identity and the fake person simply “disappears.”
Increasingly, deepfakes have become part of the development of synthetic identities. The U.S. Department of Homeland Security says deepfakes “utilize a form of artificial intelligence/machine learning to create believable, realistic videos, pictures, audio, and text of events which never happened.”
In terms of online gambling, deepfakes can provide illegitimate account verification to bypass licensees’ and vendors’ compliance systems. That threat is becoming ever more prevalent in the online gambling industry.
Digital fraud escalating in frequency in the gaming industry
A recent report from TransUnion surmised the impact of digital fraud of all kinds in the US. That’s especially been the case for the gaming industry. According to TransUnion, “the retail and video gaming industries saw the highest rates of suspected digital fraud” across the globe.
TransUnion estimates the rates of fraudulent activity for land-based gaming entities at 10.6% and 7% for online gambling. Furthermore, TransUnion notes that “when looking at industries from a global digital transaction growth perspective, the gaming industry stands out, showing a year-over-year increase in total transactions of 85.3%.”
Isolating fraud instances to transactions in the US, “gaming had the highest suspected digital fraud attempted rate in the first half of 2023 at 10.2%.” While that data suggests online gambling companies are a target, it isn’t difficult to understand the reason behind that targeting.
Stuart Wells, Chief Technology Officer at Jumio, explains why US online gambling companies have a target on their backs when it comes to people committing digital fraud.
“Part of the equation is that online gaming is still very much in its youth across much of the US. iGaming captures everything from daily fantasy sports betting to online poker rooms to virtual casinos, all of which are at different stages of maturity in the states where they are available,” Wells explained. “As more states expand their online gaming offerings, fraudsters view it as an opportunity to get in on the ground level. Synthetic identity fraud, in particular, can be tricky for gaming operators as it makes malicious actors extremely difficult to trace. If an attacker can bypass defenses and operate under a synthetic identity, they may be able to operate undetected, meaning that operators might not catch a fraudster until a player’s account has been manipulated or some kind of fraud has been committed.”
Due to the emergent nature of regulated online gambling in the US, Wells feels that “many are still learning how to adequately defend themselves from potential cyber attackers.” Fortunately, they have allies in that pursuit.
Limiting exposure comes down to deploying adequate protection
Regulators and vendors can aid online gambling companies in limiting their liabilities to digital fraud. To be of greatest benefit in that role, however, regulators must educate themselves about the threats and ways to limit them.
After becoming adept with the information, sound standards that require licensees to deploy adequate controls will provide an ounce of prevention that is worth more than a pound of cure. Wells states that “regulators can provide a best practices framework to complement the often complex and confusing set of regulations being enforced.”
Online gambling companies don’t have to build systems to address digital fraud on their own. Companies like Jumio, which employ tools to safeguard commerce for clients, can be of great aid with turnkey solutions. Wells provides an example of that technology.
“Identity verification, specifically multimodal biometric verification, goes a long way toward fighting attempted synthetic identity fraud,” Wells commented. “To ensure responsible gaming, meet age verification requirements and achieve regulatory compliance, identity verification is a must for online gaming operators. This verification process cross-references the physical ID provided by a prospective registrant with a live image captured at registration, comparing multiple biometric features, like eyes and facial structure, to confirm that the player matches the ID. Fraudsters attempting to register with a synthetic identity, typically composed of mismatched pieces of real personal information (or interspersed with completely fictitious information), will raise a red flag during this process. If the photo does not match the ID, or a user attempts to circumvent live photo capture with another fraudulent tactic, the user will be stopped from completing registration. Similarly, if the ID is determined to be manipulated or fabricated, the user will be blocked from registering.”
When it comes to the necessity of systems like these, that can’t be understated given the enormity of the stakes. That goes not only for the gambling companies but the people who play on their online casino apps.
The enormous risks for everyone in the online gambling ecosystem
The potential consequences of unchecked digital fraud involving online gambling are layered and varied. For gaming companies, risks include loss of revenue attached to a tarnished reputation and disciplinary actions from regulators.
Moreover, online gambling activity itself could become part of the creation of synthetic identities. Those possibilities range from bad actors penetrating systems to glean information to use in their creation and using such accounts to make synthetic identities appear legitimate. Potential vulnerabilities of identifiable data are just the beginning of liabilities for players, though.
“The operators themselves are typically the targets because of the opportunity for financial gain,” Wells added. “However, individual players are usually the ones who get caught in the crosshairs of such attacks. Gaming operators have a responsibility to protect their players and ensure that the personal information they collect from their users is safe and secure from any potential malicious activity.”
Because of their liability, players can also take steps to limit digital fraud via synthetic identities. Equifax includes some tips for all consumers in this regard.
- Secure your Social Security Number
- Use digital security software like password storage and virtual private networks
- Watch out for phishing scams in digital communications
- Monitor your credit activity for suspicious developments
Finally, gamblers should know that rigorous identity verification requirements for regulated online casinos are not like Polyphemus in being unnecessarily obstinate. Rather, they are taking all possible measures to protect their businesses and players.
