The Communications Fraud Control Association’s (CFCA) annual fraud survey provides telecoms fraud managers with an assessment of the key revenue threats from fraud.
The latest survey identified the top five frauds being committed against service providers as:
- $10.76 B (USD) – International Revenue Share Fraud (IRSF)
- $5.97 B (USD) – Interconnect Bypass (e.g. SIM Box)
- $3.77 B (USD) – Premium Rate Service
- $2.94 B (USD) – Arbitrage
- $2.84 B (USD) – Theft / Stolen Goods
As you can see from the numbers, each fraud is a billion-dollar problem. In this blog we plan to address how each one is perpetrated.
IRSF: International Revenue Share Fraud has been an issue for more than a decade. It relies on a fraudster partnering with a network service provider that charges high rates for call termination. The fraudster then makes lots of very long calls to that country, which are terminated by the operator and the revenue is shared between the two, says Andy Gent, CEO of Revector.
IRSF is only possible because of the delay between the time a call is made and the time call data records are analysed by the network. Operators that can reduce this time lag to zero and/or identify high volumes of long calls coming from one country to another have the best chance of reducing this activity.
Bypass or SIM Box fraud: Fraudsters exploit the difference between international and local call rates by buying thousands of local SIM cards and inserting them into a GSM Gateway or SIM Box, which is then connected to the internet. They then sell international phone minutes and connect them as local calls. The operator is therefore denied the full international payment rate, resulting in a loss of revenue.
SIM Box fraud relies on two things: The value of termination being more than the cost of a local call and the availability of thousands of SIM cards. Operators that make lucrative offers on local calling bundles need to be extremely wary of how easy it is for people to gain access to large volumes of SIM cards.
Premium rate services: There are still countries where the premium rate market is unregulated and fraudsters can generate as much as $2 per minute of calling by encouraging people to call premium rate numbers or diverting traffic illegally to premium rates. A typical scam is wangiri, where millions of one second calls are made to mobile devices. The calls do not connect but do leave a “missed call” footprint. Only a small number of callers need to return these calls to generate significant revenue for fraudsters.
Arbitrage: Typically relies on voice over IP (VoIP) calling to generate illicit revenues at the expense of operators. Fraudsters create routes from one country to another that largely rely on low cost VoIP services to deliver the call. Fraudsters then take advantage of the difference in price between traditional networks’ calling – either over long distance calls in country or, more likely, via roaming, to hijack calls and deliver via the internet.
Callers are charged the full cost of the call and the fraudster pockets the difference between that and the cost of the VoIP routes. Users lose out as access to services such as voicemail and caller line identity are lost. Quality can also be poor.
Operators can combat arbitrage by ensuring they only resell minutes to reputable companies and keep a close eye on their partnerships with third parties.
Theft/Stolen goods: From the fiber into a data centre to the mobile handset left on a doorstep because nobody is at home, telecommunications hardware theft continues to be a major issue for service providers.
There are obvious opportunities to combat theft through measures to limit access to equipment internally, to ensuring that a handset is never left in the hands of the wrong individual. Smartphones remain easy to steal and simple to sell on. Initiative such as Blacklisting IMEI numbers can offer a disincentive to thieves and fraudsters.
The author of this blog is Andy Gent, CEO of Revector
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