The number of sportsbooks in operation in the U.S. and Canada has exploded in recent years due to the proliferation of jurisdiction now allowing them to operate. Where once it was a near monopoly for the State of Nevada, it has now grown so widespread that there a few states where it is still not legal to go and make a sportsbook wager in person, or to use an affiliated mobile phone app to do so.
Threats to the sportsbooks in bricks and mortar casinos can be broken down into three main areas (although strict definitions can vary and there is a fair amount of “bleed” from one category to the next):
- Fraud and Theft
- Scams, Cheating and Advantage Play
- Anti-Money Laundering and Anti-Terrorist Financing Issues
There are also three broad types of odds-making systems for sportsbooks:
- Pari-mutual systems: Where the overall amount of money in the “pool” is used to determine the payout rations and the odds are only fixed when the pool is closed.
- Fixed odds systems: where the odds are fixed when the bet is made and they will not change (for this bet) thereafter.
- Exchange wagering: Where the bets and odds are made by a peer group and the sportsbook only takes a commission for facilitating the transaction.
1. Fraud and Theft:
Account takeovers (ATO): Fraudsters gain unauthorized access to legitimate player accounts to steal funds or place unauthorized bets. They then cycle through any funds, free play/matchplay or credit before departing with the winnings.
Multiple account fraud: Fraudsters create numerous fake accounts to exploit signup bonuses, manipulate games, and facilitate collusion scams like gnoming/matched betting. Here an individual with multiple accounts, each with a signup bonus, free play or the like, would bet both sides of any proposition, so that no matter which side “won” they would get paid something.
Payment fraud: Stolen credit cards used to fund accounts, phone top-up abuse tricking players into making fraudulent payments, and first-party chargeback fraud where customers dispute legitimate losses.
2. Scams, Cheating and Advantage Play
In most cases, the reason sportsbooks fall victim to various scams, cheating, theft and fraud is that there are few people on a gaming property who do understand how sportsbook operate, other than the manager or director, In fact, due to the rapid spread of sportsbooks across the nation and the now common reliance on third parties to provide the necessary technology and expertise, an experienced manager or director may not be in place or even available. Casino operators, including surveillance, often accept that sportsbooks are essentially a turnkey operation and require little, if any, oversight. That is truly not the case!
As discussed, there are methods to attack sportsbooks and surveillance must treat the book just as they would any other game on the property. The book must be monitored to the extent that you know your players, what bets they are making and how much, what they win and lose, and how much your book is winning overall.
Moreover, we must monitor the book employees for internal theft and fraud, as well as collusion with outside agents. In our experience, books are ripped off on a regular basis and they must be patrolled, monitored, and audited as a high-risk operation. While third party operators provide a trustworthy service and systems that are extremely difficult to compromise, even they are subject to insiders who have manipulated their system for illicit gain.
Collusion schemes: Where multiple players intentionally lose to transfer funds to accomplices, and once again employ gnoming/matched betting schemes to manipulate the sportsbook. Most typical in exchange wagering contexts.
Bonus abuse: Multi-accounting to repeatedly claim new player bonuses and promotional offers, burdening operators with unintended payouts. This is also done where patrons claim to “always be losing” to try to scam more credit from the sportsbook.
While outside the scope of this article there can also be match-fixing scams where it is known that certain outcomes will occur.
3. Anti-Money Laundering and Anti-Terrorist Financing issues
While parimutuel style odds-making is relatively immune to AML/ATF scams, the same cannot be said about fixed-odds and exchange wagering.
While nowhere near as anonymous as the on-line sportsbooks, the very automation of modern casino based sportsbooks allow the prospective money launderer to avoid human interaction as they pursue the same techniques as outlined for direct scams and frauds. Including the use of stolen financial information.
Multiple “mule” accounts can be used where an individual (with multiple accounts) or even many individuals (paid a commission) play in a certain pattern employing offset betting. Of note: while very similar to the matched betting fraud, the aim there is to profit via the bonus’ offered and free play. From an AML perspective a “profit” is not required, laundering the money will do.
Mitigating strategies
The following mitigating strategies should be employed by any sportsbook to limit the exposure to the scams outlines above:
Stringent identity verification and Know Your Customer (KYC) checks at onboarding.
Check for ID’s whenever possible (certainly when signing up for an account) and confirm that these ID’s are genuine.
Caution and control should be exercised when issuing sign-up bonus’ and free play/free credits.
Behavioral analytics and device fingerprinting to detect multi-accounting and suspicious betting patterns.
- Do betting patterns suggest matching wagers/gnoming?
- Does the correspondence to multiple accounts go to the same address/mailbox? Do they have the same contact details?
- Have there been deviations in historic betting patterns? Do individuals bet more money in a session or attend more sessions?
- Matching patron patterns and activities and even dress. Do the patrons look “shabby” compared to the money they are wagering? Do they “seem to be going through the motions” despite the amounts being wagered? Showing little or no engagement to the sporting event, betting mechanically, or by rote?
- Are there deviations in times of play? Lots of play at odd hours?
- Are the wagers being made on obscure sports (to the U.Ss market)? Are there suddenly a lot of wagers in Indian Premier League cricket, for example.
Ongoing transaction monitoring and risk scoring to flag unusual deposit/withdrawal activity.
Collaborative engagement with peers, regulators and law enforcement to share information and investigative techniques.
Some examples of threats to sportsbooks:
In 2023, Amit Patel, a former financial supervisor for the Jacksonville Jaguars NFL team, was sentenced to 78 months in prison for embezzling over $22 million from the team over a four-year period. Patel manipulated the club’s virtual credit card system and diverted funds for his personal use, primarily through online gambling:
https://www.nytimes.com/athletic/5646618/2024/07/19/jaguars-sue-amit-patel/
Shohei Ohtani’s former interpreter was charged with bank fraud by the US Department of Justice, which accused him of wiring more than $16mn from the Los Angeles Dodgers baseball star’s bank account to pay off gambling debts.
https://www.ft.com/content/f4751857-04f7-4d82-b3b3-eb094cc3770e
While typically connected with on-line gambling there is very good reason to know that similar activities, if perhaps for lesser amounts, can affect any sportsbook operator.
All of these can be detected by a knowledgeable surveillance team.
Key points:
Surveillance can and must protect the sportsbook. Listed below are some best practices to get you started:
- Train surveillance personnel to understand the book, how wagers are made, and paid, and the process to do so.
- Perform regular analysis of sportsbook numbers. All books have software applications that monitor virtually everything that happens in the book. Make sure you have access to that application.
- Know your numbers. Like every other game, books should “win” a certain overall percentage. It is usually about five per cent, however that number can change due to marketing promotions and incentives. Each type of wager has its own percentage. Watch those numbers. At the very least, your win percentage should meet budget expectations. Should it not meet that number, you must investigate to find out why.
- Know your customers, not only for AML/BSA reasons but know who is winning consistently. How are they doing so?
- Audit the book regularly to detect suspicious players, employees and activity.
These key points will get you started. Additionally, the International Association of Surveillance Professionals (IACSP) provides reference material for surveillance on protecting their sportsbook as well as a professional certification for surveillance personnel. IACSP can be contacted at www.iacsp.org.
Does your operation need a security and surveillance audit or custom on-site training? Contact Raving today https://betravingknows.com/contact/
