The Triangle of Online Gambling Fraud

Thursday, 16 March 2023

by Adrian Șandru, experienced lawyer, specialized in criminal law


Fraud is on the rise in the gambling industry and online gambling. In Q2 2021, the rate of digital fraud attempts increased by 393% year-on-year. Furthermore, in the first quarter of 2022, there was an 85% increase in false account registrations compared to the last quarter of 2021.

Fraud also has many dimensions. With the accelerating use of digital platforms for all forms of entertainment, the number of online frauds has obviously increased. It is considered important to know the methods of fraud and the modus operandi of attackers in order to combat and prevent fraud. In this regard, we will provide some examples of new methods of fraud in online gambling.

However, we believe that knowing the method of fraud can be an effective way of combating fraud only in the short term. Given the diversity of frauds committed, the imagination of online fraudsters characterized by innovation and ingenuity, discovering a modus operandi in committing fraud may not be an efficient and effective method of combating and reducing the number of online fraud attempts in the medium and long term. There will always be new forms of fraud and these will be discovered and identified after having first negatively affected online gambling operators.

In order to effectively combat any type of fraud with noticeable results in the medium and long term and to significantly reduce the number of fraud incidents/attempts, all operators in the online gambling area should know and assimilate what specialists call the fraud triangle with the specificity of this sector. However, as a preliminary point, we consider it relevant to provide some examples of types of fraud in the area of online gambling and then to exemplify the fraud triangle.

Types of frauds and fraudsters in online gambling

  1. Identity thief

To “scam” online gambling platforms, sophisticated scammers don’t just use forged documents to create an account. Instead, they often buy real credentials from the darknet. In this way, even the most reliable systems will not detect anything suspicious, as the documents and data entered are real, even if they do not represent the identity of the person handling them.

  1. Malicious affiliate

There’s no denying that affiliate marketing can be a good revenue stream, but some people who should just be recommending certain services to their followers are using illicit tactics to earn undeserved commissions. For example, fraudsters manually enter fake leads into a company’s CRM, while others generate traffic through bots. Such bots can even register accounts and make bank deposits so that the person who recommended the service can collect a commission.

  1. Arbitrage betting

Arbitrage betting is a gambling strategy that involves placing bets on all possible outcomes of an event to guarantee a profit. This could mean, for example, placing three bets on the outcome of a football match: one to each team plus one in a tie. Although this form of betting is known to have existed since the beginning of physical betting, the advent of odds comparison platforms and betting exchanges has facilitated the practice. Furthermore, there are certain highly experienced so-called “key-men” who hire others to place bets on their behalf in order to avoid detection and to increase the accessibility of retail bookmakers and allow key backers or referees to sit at a computer to keep track of market movement. Usually, this method also involves other types of fraud or the use of insiders who could manipulate odds or even speculate on the errors of a computer system. Recently such a case was also made public in the Romanian press. According to the Capital Police, from the data and evidence administered in the case by police officers from the Economic Crime Investigation Service – Sector 2, it emerged that, between 2018 and 2020, 5 employees of a large betting agency, having the position of statistician referent, facilitated the winning of a number of 184 sports bets, by illegally changing the betting odds. In concrete terms, if there happened to be a running bet, i.e. a reversal, they used, based on those famous 3 seconds, to withdraw the stake using the Cash Out method. By using this method, losing bets were avoided.

  1. Multi-accounter (multiple accounts)

Multi-accounting is when a user registers multiple accounts to take advantage of an online service. This is done to repeatedly take advantage of certain freebies, discounts and welcome bonuses or to continue using the service after you have been banned from using the password. To create accounts, fraudsters can use the personal details of friends and family or even stolen credentials purchased on the darknet. Usually, this type of fraud facilitates other types of fraud or hides the traces of other frauds.

Adrian Șandru

Adrian Șandru

Representation of the fraud triangle in online gambling

The fraud triangle is represented by three main factors that contribute to fraud. It has certain specific characteristics depending on the sector and the people who usually commit the fraud. The online gambling fraud triangle consists of:

  1. Opportunity

It has been stated on several occasions that of the 3 components that make up the Fraud Triangle, the opportunity is the only one that companies can fully control through well-designed procedures and processes. Paradoxically, more often than not, the occasion is as easy to control as it is hard to notice. Vulnerable areas …..

  1. Motivation

The motivation of fraudsters is diverse. It starts from trivial financial needs, to validation needs or hubris to demonstrate the capabilities of fraudsters to “beat” the security systems of an online gambling platform that initially seems impenetrable.

  1. Justification or Rationalization

Rationalization is the justification for why people commit fraud. As a rule, they try to justify that certain sums of money are due to them, such as the bonus offered by some platforms, or that they are just speculating the errors of some digital online gambling platforms without pretending not to know that by their actions they commit computer fraud punishable even with imprisonment by criminal law.

The Triangle of Online Gambling Fraud

The Triangle of Online Gambling Fraud

The effects of fraud

The main effect of the fraud is definitely the significant financial losses for online gambling platforms. But, perhaps less visibly, at least as important is the bad reputation among partners and users. Gambling platforms that experience high levels of fraud and numerous reimbursement disputes acquire unreliable reputations among banks and processors. This results in penalties from business partners, additional fees or even a permanent refusal to provide certain services. Moreover, honest users switch to competing platforms, which is detrimental to an online gambling operator in the long run.

How can online gambling fraud be combated?

When discussing the fight against fraud there are two perspectives from which the issue can be viewed. What to do before fraud (prevention) and what to do after fraud is identified (response). We believe that prevention should be a main element in the activity of online gambling operators, as prevention would avoid financial and image losses that can sometimes have an irreversible negative impact. Moreover, the phenomenon of fraud cannot be totally stopped, but it could be substantially diminished by an effective prevention that reduces damages of any kind for the company. Calling in the specialists can be providential to the success of a business. Qualified in-house staff together with private investigators and fraud lawyers can form the triangle of an effective fight against online gambling fraud, both in response to fraud (identification and recovery of damages) and to detect vulnerabilities and prevent potential fraud.

Author: Editor

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