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Risk and Fraud Monitoring

Risk and Fraud Monitoring

Comprehensive Guide to Risk and Fraud Monitoring

Step 1: Overview

The Payments and Risk team monitors incoming and outgoing transactions to ensure optimal traffic, detect irregular activity, and maintain clean financial operations.

Step 2: Monitor Credit Card Chargeback Rates

High chargeback rates can have significant implications:

  1. Placement on scheme mitigation programs: High chargeback rates may trigger additional monitoring by card networks.
  2. Financial penalties: VISA and Mastercard fines can range from $25,000 to $225,000 per Merchant ID (MID).
  3. Increased processing costs: Elevated chargeback rates lead to higher fees.
  4. Loss of processing privileges: Excessive chargebacks can result in termination of credit card payment options.

Step 3: Detect Credit Card Fraud

Be vigilant for common fraud techniques:

  1. Identity theft: Using stolen information to create accounts or make transactions.
  2. Card testing: Small transactions to validate stolen card data.
  3. Account takeover: Unauthorized use of legitimate accounts for fraud.
  4. Friendly chargebacks: Disputing legitimate transactions post-betting.

Identify red flags in deposit patterns:

  • Rapid succession of small deposits.
  • Unusual timing (odd hours).
  • Geographic mismatches or inconsistent amounts.
  • Multiple cards or frequent payment method changes.
  • Sudden large deposits or repeated failed attempts.

Step 4: Monitor Bonus Fraud

Bonus fraud undermines promotional efforts, creating financial risk and damaging the brand reputation.

Types of bonus fraud:

  1. Multi-accounting: Claiming bonuses multiple times with fake accounts.
  2. Bonus abuse: Exploiting terms for financial gain.
  3. Collusion: Coordinated play to manipulate bonus outcomes.
  4. Bonus hunting: Systematic exploitation across platforms.
  5. Identity fraud: Using fake or stolen identities for multiple claims.

Detection and mitigation strategies:

  • Watch for unusual bonus claims or usage patterns.
  • Identify shared IPs, devices, or payment methods across accounts.
  • Monitor high bonus conversion rates and suspicious betting behaviors.
  • Exclude high RTP, low variance games from bonus eligibility.

Step 5: Detect Affiliate Fraud

Affiliate fraud occurs when affiliates manipulate deposit activities for personal gain. Common tactics include:

  1. Self-depositing: Affiliates creating fake accounts to earn commissions.
  2. Incentivized deposits: Offering players bonuses outside the casino’s terms.
  3. Deposit abuse: Encouraging multiple small deposits to exploit bonus systems.
  4. Misattribution: Using techniques like cookie stuffing to claim undue credit.

Mitigation involves collaboration between payments and affiliate teams, analyzing deposit patterns, user behavior, and cross-referencing affiliate data.

Risk and Compliance Procedures

Risk and Compliance Procedures

Verify the Match

  • Confirm the accuracy of the match by comparing the player’s details (name, date of birth, nationality, etc.) with the PEP or sanction list information.
  • Ensure it’s not a false positive, as name similarities can often trigger alerts.

Categorize the Match

  • If PEP only:
    • A PEP designation does not prohibit activity but requires enhanced due diligence (EDD) due to higher money laundering risk.
    • Proceed with EDD measures such as:
      • Identifying the source of funds and wealth.
      • Monitoring transactions more closely.
  • If sanctioned:
    • Transactions or account activity must immediately cease.
    • In most jurisdictions, engaging in financial transactions with sanctioned individuals is illegal.

Freeze the Account (If Sanctioned)

  • Block or freeze funds immediately to ensure compliance with legal obligations.
  • Prevent any withdrawal, transfer, or use of the account until further action is decided.

Report to Authorities

  • File a Suspicious Activity Report (SAR):
  • Report the case to your jurisdiction’s Financial Intelligence Unit (FIU) or the relevant authority (e.g., OFAC in the U.S., or the EU Sanctions Authority).
  • Notify regulators and your financial partners if required by law.

Internal Review

  • Assess whether your due diligence and KYC processes properly identified this match during onboarding.
  • Strengthen screening measures if necessary.

Take Additional Actions

  • If legal, consult with your AML officer or legal team about the specific jurisdiction’s requirements for handling sanctioned individuals or PEPs.
  • Retain all evidence, communication, and reports related to the match.

Documentation

  • Keep detailed records of actions taken, including:
    • Match verification.
    • Communications with authorities.
    • Account activity before the freeze.