Growth of AI-Based Fraud in iGaming: How to Tackle it?

Did you know that AI-based technology is transforming the iGaming industry while also becoming its greatest threat? As artificial intelligence reshapes the gambling market, fraud is also taking a new form, assisted by this technology. 

With the global gambling market projected to reach $153 billion by 2030, the risk is going to expand. According to a report by Sumsub, fraud in the online gaming industry increased 64% year-over-year on average, from 2022 and 2024. This fraud causes billions of dollars in losses and, therefore, demands immediate action from operators, regulators, and players. 

How AI Is Changing the Face of Fraud in iGaming?

AI is like a double-edged sword in the iGaming industry. On one side, it enhances and smoothens operations while delivering extraordinary user experiences. Yet, on the other hand, it is exploited to facilitate fraudulent activities. 

Here is how AI is reshaping the fraud landscape:

1. Automated Multi-Accounting

With the help of AI, fraudsters are developing bots that can create and manage multiple accounts at one time. These accounts are mostly used to gain more bonuses. According to a report in 2023, it was found that 20% of bonus abuse cases in iGaming involved automated multi-accounting. 

2. Advanced Cheating in Games

According to research by Juniper, the iGaming industry lost $1.4 billion in revenue in 2022 due to unfair play. This number is likely to rise higher in 2024. Al-based algorithms can detect gameplay patterns and predict outcomes, which gives unfair advantage to users in games like poker or virtual sports betting. This damages trust and affects the experience of genuine participants. 

3. Malicious Identity Fraud

Sumsub's fraud report indicates that the number of fraud cases has doubled between 2021 and 2024. During this period, 67% of businesses reported increased fraudulent activities. Part of the reason for this trend is that fraudsters use AI tools to create fake identities and deepfake documents, skipping the regular KYC checks. 

4. Affiliate Fraud Amplified by AI

Some affiliates use AI technology and bots to artificially boost traffic and sign-ups, allowing them to claim higher payouts. This abnormal activity harms established partnerships and leads to reduced revenue for operators.

5. Money Laundering and Transaction Fraud

In 2022, the Financial Action Task Force (FATF) projected that around $2.8 billion was laundered through online platforms. This highlights a growing challenge against financial crime. To add to the situation, AI tools can hide suspicious financial transactions. When players make use of such practices, it becomes very tricky for brands and operators to comply with anti-money laundering (AML) regulations. 

AI-Based Fraud’s Impact on Industry and Players

• Reduced Trust: Players expect fair gameplay and a regulated, authentic gaming environment. However, fraudulent activities are damaging the reputation of brands, and hampering the overall experience of iGaming activities.
   

• Regulatory Penalties: Neglecting AML rules, KYC regulations, and data protection requirements can lead to substantial fines. In 2023, some operators faced penalties that surpassed $50 million in value.
   

• Operational Challenges: Fraud management takes away additional resources from businesses, ultimately, affecting their growth and consuming significant server budgets.

AI Fraud Prevention: The Key Role of Technology and Strategy

Tackling AI-driven fraud requires a dynamic, multi-layer approach. iGaming operators must utilize technology and strategy to detect it. Here’s how:

1. Leverage AI for Fraud Detection

AI is not only a tool for creating fraud or scams; it is also a powerful weapon for preventing them. You can use a solution like Affnook, which offers real-time monitoring and detection capabilities for fraudulent activity in iGaming affiliate marketing. It can identify duplicate IP addresses, suspicious user behavior, and block fraud activities through both manual intervention and automation.

2. Enhance KYC and AML Protocols

Strong verification methods like biometric authentication and AI-enabled risk evaluation, create a difficult path for fraudsters to conduct their malicious activities. In 2023, operators with solid KYC systems reportedly managed to push the fraudulent activities on their platforms by 40%.

3. Monitor Affiliate Activities

Monitoring affiliates is crucial for operators to ensure that their platform is attracting genuine traffic and that player sign-ups are accurately rewarded. Affnook provides advanced analytics, enabling operators to track affiliate activities with laser-focused precision.

With its robust tracking system, Affnook provides detailed reports on traffic sources, conversions, and sign-up patterns, helping identify legitimate efforts and point out any fraudulent activities. The platform’s customizable features allow operators to set up performance benchmarks, ensuring affiliates adhere to quality standards and enhancing transparency in payout calculations.

4. Collaborate Across the Industry

Collaborating across the industry is essential to combat emerging trends in fraud activity. By sharing data and insights on new and emerging fraud tactics, industry professionals can work together to develop effective strategies to counter threats even before they are realized. This collective effort will enable the creation of stronger defenses, faster identification of fraudulent activities, and more efficient response systems, ultimately reducing the impact of fraud on businesses.

Summing Up

With the rise of AI-based fraud, the iGaming industry must also innovate to keep a check on it. By using Affnook, iGaming operators can detect and prevent fraudulent activities in iGaming affiliate marketing effectively. 

The aim is clear: we have to implement AI with the right strategies to achieve growth in the future. By doing this, the industry will be able to not only tackle future AI-based frauds but also have the opportunity to achieve sustainable growth and success in the future.