Chip dumping, a type of specialized fraud, has become a significant issue in the online gaming industry. This article will delve into the problem of chip dumping, its impact on the industry, and how it can be prevented.

Why is chip dumping a problem?

Chip dumping, besides other types of specialized fraud like matched betting, significantly impacts the online gaming industry. Such activities cost companies time, money, and valuable resources due to the practices themselves and the obligation to enforce measures to mitigate them.

According to a CNBC article citing data from a TransUnion report, in Q2 2021, the number of online fraud attempts in the gaming sector worldwide went up 393% year-over-year. Moreover, the gambling fraud rate in the US came close to 262% during that same period.

Is chip dumping illegal?

While no specific law defines the act as illegal, it is still strongly discouraged. Regarding chip dumping linked with bonus abuse, it is always against an operator's terms and conditions. However, since it is illegal to launder money, chip dumping involving such activity is strictly against the law.

Overall, if players get caught in chip dumping, their chips and money could be confiscated, and their user accounts could be permanently banned. If money laundering is involved, there is also the real possibility of serving jail time.

Examples of chip dumping

The most common chip-dumping scenarios include:

• Tournament play: Suppose a player (Player A, the leader) enters themselves and four others into a tournament. Whenever seated at Player A's table, the four other players must dump chips at their leader. Doing so lets Player A gather a stack without risk and has a better chance of winning the tournament.
• Bonus abuse: Some poker rooms offer bonuses to attract newcomers. Such bonuses usually cannot be withdrawn until the player has paid a certain amount of commission.

How to prevent chip dumping as a gaming operator

Operators committed to mitigating chip dumping and other types of fraud must employ a comprehensive prevention strategy addressing all aspects of online gaming fraud.

• Safety procedures: Implement KYC verification checks with document verification, biometric checks, and live video identification to fight iGaming fraud.
• Detection measures: Flag inconsistently large bets or repeated losses to the same opponent.
• Tracking and analyzing player behavior: Utilize sophisticated systems for real-time monitoring and analysis of player actions, detecting unusual betting behaviors and interactions between accounts.
• Strengthening identity verification: Enhance identity checks during account registration and fund withdrawals by employing KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures.
• Setting withdrawal and deposit limits: Implement limits for withdrawals and deposits based on player behavior and risk assessment to mitigate chip dumping and control money transfer amounts.
• Collaboration with authorities: Engage in cooperation with both local and international authorities to promptly report and investigate any suspicious activities, sharing relevant information as needed.
• Utilizing AI and machine learning: Harness AI and machine learning technologies to identify abnormal gaming patterns and potential instances of money laundering.
• Partnering with other gaming platforms: Collaborate with fellow gaming platforms to exchange information and tactics for combating fraudulent activities.
• Regular audits and internal checks: Conduct routine audits and internal assessments to ensure the efficacy and currency of security measures.

As stated, fraud detection can be easy or difficult, depending on the wrongdoer's expertise. However, the right combination of detection tools, knowledge sharing, and fraud prevention can help operators implement robust defenses.