Gambling sees increased risk from GenAI fraud, growing need for biometric IDV

A survey of recent content on biometrics and the global gambling industry reveals a growing sector that needs strong identity verification – and also a better taxonomy.

Gaming, iGaming, e-Gaming and more: in the context of biometrics and digital identity, these terms typically refer to online gambling. Anyone who has watched a recent sports broadcast from the UK or North America will know how embedded online sports betting has become in mainstream sporting leagues. Looser regulations on gambling have opened the floodgates, and huge sums of money are now at stake; according to a new report from Onfido, “The Gaming Operator’s Guide to Identity Verification,” the market is expected to reach US$158.2 billion in value by 2028.

Pity those poor gamers who just want to shoot NPCs or race Mario around a track.

No matter how the language is diced up, online gambling is a ubiquitous reality. So, says Onfido’s report, are gambling regulations, ranging from age assurance requirements to local KYC and AML compliance rules. “Gaming operators are now facing similar compliance requirements to banks and other financial institutions,” the report says. As such, the matter explicitly informs two of the listed IDV use cases for online gambling: regulation and compliance, and fraud prevention. (The last, customer acquisition, highlights the need for good UX to complement security: “Any verification process built into registration should reduce drop-off and maximize conversions.”)

While fraud is more easily associated with financial losses, noncompliance can also be costly. Onfido cites data from the UK Gambling Commission (UKGC) showing that 15 gaming businesses paid a total of £32.1 million (US$43.1M) as a result of fines or regulatory settlements in 2021.

The regulatory landscape, meanwhile, is highly irregular terrain. Rules differ in the U.S., Europe, the UK and elsewhere – for instance, Brazil which has a massive sports betting market.

In the U.S., online sports betting is permitted in 20 states. That means large swaths of the country – including Texas and California – are still technically prohibited from making sports bets online. How strictly they enforce the law is another story.

On the other hand, the UKGC is “one of the strictest gaming bodies in the world and has been known to issue heavy fines on operators who don’t meet certain requirements.” It has issued explicit warnings about the prevalence of AI deepfakes connected to emerging money laundering and terrorist financing risks. It has also levied fines, slapping two gambling operators with them in April for AML failures.

The EU is another patchwork of rules and regulations, with laws differing across Spain, France, Italy, Germany, the Netherlands and elsewhere. The EU Digital Identity Framework Regulation came into force in 2024, and eIDAS 2.0 is driving the adoption of digital identity wallets.

In comments to iGaming Business, Web3 recruiter Spectrum Search’s CTO Peter Wood says “what’s missing right now is consistency. There’s no shared framework for tackling AI-driven fraud, and that needs to change. Regulators should be pushing for industry-wide standards around ID verification that are designed to hold up against AI. We also need to see better collaboration between platforms, some kind of anonymised, real-time data sharing system that helps flag suspicious activity across the board.”

Alberta could be a major market for online sports betting

In Canada, the province of Alberta is preparing to legalize online gambling. A blog from Rebekah Jackson, director of gaming at GBG – which provides identity verification to some 60 percent of licensed iGaming operators in Ontario – says that, “despite having a smaller population than Ontario (4.9 million vs. 16 million), the Alberta iGaming market looks set to give Ontario a run for its money.”

Ontario legalized single-game sports wagering in 2021, opening the door for online sports betting apps. In 2023, the regulated iGaming market generated CA$2.4 billion (US$1.73B) in revenue. The Alberta Gaming, Liquor and Cannabis Commission (AGLC) estimates Alberta – a conservative state with proclivities for U.S.-style individual freedoms – would yield similar results.

Nonetheless, regulations are inescapable, and GBG says “need-to-knows for operators are likely to closely follow the iGaming Ontario model ensuring FINTRAC-compliant player verification.”

FINTRAC is the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s national financial intelligence unit, which is responsible for the detection and prevention of money laundering.

That means betting Albertans will need to undergo KYC checks with identity verification at the point of onboarding, and for some transactions.

“If player identity verification does follow the Ontario model,” GBG says, “FINTRAC-compliant player checks will most likely match personal data – name, address and date of birth – against trusted Canadian credit bureau data,” either in single or dual matches, depending on the use case.

Age assurance will also be part of the conversation when sports betting comes to Alberta, where the legal age for gambling is 18. Likewise with “affordability screening” and betting limits.

As to which body will be responsible for regulation, the question remains unanswered. The AGLC is responsible for administering the Gaming, Liquor and Cannabis Act in Alberta, but also runs the PlayAlberta gambling platform, making for a conflict of interest. The creation of an independent regulator is likely in the long run.

Africa could be an even bigger market for online sports betting – with biometrics

The African continent, meanwhile, is battling the negative effects of online gambling – namely, a problem with underage users. An article in Sigma reports of “mounting pressure to curb underage play.”

Firms like Jumio have taken notice. The piece quotes Philipp Pointner, chief product officer at Jumio, who says that an African context, rapid onboarding and mobile-first user journeys make selfie checks an attractive biometric age assurance solution for online gambling, provided connectivity and device capabilities support live liveness checks.

Infrastructure can be an issue in Africa, says the piece, with “spotty connectivity, varying device quality and privacy concerns.” But that is not stopping market expansion. Mobile wallets and crypto payments are gaining traction, spurring demand for online gambling – which inevitably makes it more accessible to underage players, despite patchwork efforts in the sector to boost KYC procedures.

Ultimately, says Sigma’s analysis, “biometrics alone cannot solve all underage gambling issues. They must sit alongside self-exclusion programmes, financial limits, and customer-education initiatives. However, by confirming age at sign-up and authenticating transactions, selfie biometrics and facial recognition offer a powerful deterrent against underage play.”

Article Topics

age verification  |  biometrics  |  digital identity  |  gambling  |  GBG  |  identity verification  |  Jumio  |  Onfido  |  selfie biometrics