EU Online Gambling and IP Geolocation
By Steve Sawyer
Online gaming has been in the media again this week as three of the sector’s biggest operators have been indicted by the US government for failure to comply with laws prohibiting “the acceptance of any financial instrument in connection with unlawful Internet gambling”. Once again the industry is dragged into debate about whether or not poker is really gambling, and, on a wider note, about the opportunities to exploit online gaming sites for the purposes of money laundering and all the criminal activities behind it. But why do we not run up against these same issues in the UK or Europe where most countries operate well regulated online gaming industries, and what precautions do operators take in order to guard against the dangers?
Well of course I’ll come at this from an IP geolocation perspective as this is where our expertise lies, but IP geolocation can be effectively used as part of a range of complementary technologies that allow online gaming to flourish when carefully managed.
There are two key ways in which Quova customers such as Ladbrokes and King.com use our technology to help them operate online. Firstly as a means to cut down on fraud. Card Not Present (CNP) Fraud is well known in the industry and we’ve all heard the horror stories of someone checking their bank balance only to find that large quantities of hard earned cash have been flittered away in online stores. One step on from this is using stolen cards to launder money through online services such as gaming. This, in particular, is what alarms the US government as this laundered money is then often used for ill-gotten purposes.
Using IP geolocation however, operators can drastically cut down the risk of someone other than the cardholder using a specific card. How do they do it? As part of each monetary transaction, operators will (just as online stores do) create a risk score for a user. This score is made up of IP data fields such as: is the user logging in from the location they usually log in? Is it the same type of connection? Are they in the same country as the one their card is registered to? Based on this information, an overall score is built up and the operator then either allows the transaction, blocks the transaction or asks for more information to clarify the situation. This all happens in the blink of an eye but these commonly used procedures can not only reduce rates of CNP fraud, they have the extra effect of helping to stamp down on money laundering as well.
The second way IP geolocation helps is to ensure that operators adhere to international laws on compliance. For instance, European gaming operators must not allow those located in the US to access their services. By simply blocking all IP addresses from the US, the operators can quickly deal with this issue and sleep better at night knowing they are on the right side of the law. “But I’ll just use a proxy then” I hear you say! Yes you could, but users sat behind a proxy often (not always I know!) have something to hide and most operators approached by a user behind a proxy will also bar access to their service just to make sure.
Intelligent use of IP data can help all sort of online businesses to operate effectively and, if you’ll excuse the pun, I’d bet that many didn’t realise how easily it can be integrated.
