By Justin Wiles CA(SA), CFE, FP(SA) Forensics Lead at GRIPP Advisory & Jayshika Nagindas LLB, CFE Specialist at GRIPP Advisory
While the COVID 19 Pandemic continues to cause devastating effects and severe social disruptions worldwide, one industry has seen a significant increase in growth.
With casinos and other gambling venues being forced to close their doors during lockdowns, and other social distancing and screening measures being enforced by these institutions on resuming operations, punters have shifted their focus to online gambling and sports betting platforms.
In South Africa, gambling is heavily regulated by the National Gambling Act, No. 7 of 2004 and the National Gambling Board, as well as provincial gambling regulations. Gambling and betting companies therefore hold operating licences with provincial gambling boards. These regulations distinguish between online gambling and online betting.
relates to various typesof gambling conducted online including poker, slot games, bingo and others. These games
are influenced more so by probabilities with significantly less ability to analyse the game. Online gambling is prohibited if practiced through a South African based platform. It is uncertain whether this type of gambling will ever become legal in South Africa.
includes betting on sports events and horse racing where punters are essentially betting on the outcome of the particular event. For this, punters can analyse various factors that could increase the odds of their bet being successful. This activity is legal if it is practiced through betting companies who are appropriately licensed in South Africa for online betting. These licenced companies also offer various products that look like online gambling, however, the betting is structured in a way that it falls under sports/fixed odds betting regulations and licensing.
As online gambling and betting has grown this has created an opportunity for Fraudsters to continually seek innovative ways in which to take advantage of the system. In recent times, some of the more common types of online fraudulent schemes perpetrated by patrons include:
Multiple account fraud:
Fraudsters create multiple accounts using fake/ false credentials (fake names, disposable emails and/or stolen credit card details) in order to tip the scale in their favour. This is also called “gnoming”. The other accounts are used to deliberately lose so one account can pocket all the wins and bonuses that go with it.
Fraudsters can control multiple players in order to defraud unsuspecting legitimate users.
Multiple fake accounts join the same poker table to cheat the system by deliberately aiding/favouring one player.
According to Mark Tipping, a leading Gaming Consultant with over 14 years of experience in the betting and gaming industry, the schemes above apply mostly to online gambling and are therefore not applicable to the regulated South African gambling environment. The following schemes are however more relevant to South African online betting:
Stolen credit cards:
Fraudsters use stolen credit card details to top up their account, which means using illegitimate money to pocket real wins. In South Africa, banking institutions have uniform online payment systems and have implemented 3D security which requires the entering of a one-time password (“OTP”). This OTP is usually sent to the account holder’s mobile number, thus making it difficult for fraudsters to transact with stolen credit cards.
Promotions are used as a lucrative way in which to attract new players. The several fake accounts thereby benefit from new signup bonuses, coupons and other attractive offers by cashing out their promotional offers without actually playing. Traditionally, gambling operators offered large bonuses with low betting requirements which caused bonus/ promo abuse to be a great target for abuse. Gambling operators addressed this by lowering bonuses and implementing stricter requirements for withdrawing the bonus. Although this abuse is not always regarded as fraudulent activity, bookmakers hope to identify and block bonus abusers as soon as possible.
The South African gambling industry is further regulated by the Financial Intelligence Centre Act (“FICA”). This Act was introduced
in 2001 to assist in the identification of the proceeds of unlawful activities, to combat money laundering and the financing of terrorism. FICA contains several control measures aimed at facilitating the detection and investigation of money laundering and terrorist financing and imposes specific responsibilities on casinos/ operators to “Know Your Client” (KYC), prior to concluding a transaction.
The KYC systems used by online betting platforms are generally automated and involve the following checks at the point of user registration:
- Identity verification
- Age verification
- Politically exposed person (“PEP”) check referring to individuals with a prominent public personality such as heads of state, ambassadors, high ranking military officers etc.
Another effective fraud prevention tool used by Bookmakers, is to verify the digital identity and footprint of a punter to give a complete picture of , by means of:
- IP analyses including proxy and VPN detection which can disclose a lot about an individual’s internet usage, location, and potential for fraudulent activity.
- Email address: ascertain when an email address was created and whether any social media accounts are linked thereto.
- Device fingerprinting: collecting all the available parameters of a device being used as some of them will immediately indicate questionable usage.
In Mark Tipping’s experience, most online betting frauds can only be realised once payment is made to the fraudster. At this point, additional documents may be needed to be submitted by the patron before payment is made, including proof of residence and proof of bank account details. In instances where non – South African punters are prohibited by Bookmakers from betting, these processes make it more difficult for these players to withdraw money from the platform without being detected.
The South African online betting industry is a heavily regulated industry and this, together with the various measures to prevent and detect fraud discussed above, has significantly reduced the risk of fraud being perpetrated by punters. As technological advances continue to be made, online betting companies will consider new ways to prevent fraud and abuse but are inherently limited by the cost versus benefit considerations of this technology. If online gambling ever gets the green light to operate in South Africa, online operators would be wise to implement strong controls to prevent and detect fraud.
GRIPP Advisory has a vast amount of collective experience in providing advisory services to the gambling industry of South Africa and other African countries. This, together with the firm’s close strategic alliances with forensics specialists, places GRIPP’s Investigations service offering in a strong position to assist clients throughout Africa (including both online and traditional gambling and betting companies) with the full life-cycle of preventing, detecting and investigating unethical activities. Our Investigations services include, but are not limited to, investigating fraud, corruption and other irregularities, fraud and corruption risk assessments, internal controls reviews, auditing of anti-bribery management systems and recovery and remedial action.
Contact the Authors/Contributors:
Justin Wiles CA(SA), CFE, FP(SA), Forensics Lead: firstname.lastname@example.org
Jayshika Nagindas LLB, CFE, Specialist: email@example.com
Mark Tipping, Gaming Consultant: firstname.lastname@example.org