Six Essential Areas of Telecoms Fraud Coverage

Telecoms fraud costs communication service providers (CSPs) USD92bil annually according to research by the Risk and Assurance Group. That’s a substantial revenue loss to CSPs that highlights the significant need for effective revenue assurance and fraud management (RAFM) solutions.

Neural Technologies’ Optimus Platform leverages the power of artificial intelligence and machine learning to provide protection against telecoms fraud, reducing revenue leakage and providing valuable fraud protection for both CSPs and their customers.

In this complex modern fraud landscape, enterprises are faced with increasingly sophisticated fraud risks. Here are six of the most prominent types of frauds which CSPs are exposed to.

International Revenue Sharing Fraud (IRSF)

International revenue sharing fraud (IRSF) is a type of call forwarding fraud whereby calls are manipulated and redirected to high-cost international call destinations. RAG estimates this type of fraud costs CSPs RM5.63bil annually. 

Fraudsters use stolen or fraudulently obtained SIM cards to generate large volumes of calls to international premium rate destinations. By using automated dialing techniques, the fraudsters can use multiple SIM cards and place multiple calls at the same time from each SIM. Such artificially created traffic to high-cost destinations generates significant costs to CSPs in a short period of time. Criminal networks then reap the rewards through unethical profit-sharing agreement for profits made by the owner of the premium rate number.

Wangiri Fraud

Wangiri is a Japanese term which means ‘one ring and cut’. Wangiri fraud describes the process of leaving short calls or fake missed call notifications via SMS with the aim of tricking customers into returning the call. The missed call number is inevitably linked to a premium rate number, creating many of the same revenue loss challenges for CSPs as highlighted under IRSF fraud. RAG estimates that Wangiri fraud costs USD1.31bil annually. 

With sophisticated networks churning out these fake missed call notifications, criminals can quickly defraud customers and CSPs out of large sums of money. Fraudsters include a variety of tricks and techniques to make the premium rate return call last longer, such as automated messages and recorded ringtones. The longer the customer stays on the call, the higher the cost of the call, and potential profits shared by the premium rate number and fraudsters.

Sim Box Fraud

Sim box fraud involves fraudsters obtaining large numbers of SIM cards from providers, then integrating them into a device known as a GSM gateway. This device is then used to direct international calls to a mobile network as if they were an internal network call, bypassing international or national costs, incurring a revenue loss for CSPs.

These GSM gateways provide a number of challenges alongside revenue loss. They can cause network congestion that impacts legitimate users’ services damaging the brand reputation of a CSP. This also forces operators to add network infrastructure to circumvent such congestions due to fraudulent traffic at locations where SIM boxes are placed. It is estimated that bypass fraud, including sim box fraud, costs CSPs a staggering USD6.86bil annually.

Private Branch Exchange (PBX) Fraud

Private branch exchange (PBC) fraud is a hacking attack which utilizes the multiline telephone systems often found in business premises. Fraudsters use a number of techniques to engage in this fraud, including tricking internal operators to transfer calls, or misleading employees into handing out access codes. Accessing voicemail systems or through digital access ports, as well as call forwarding changes, are all possible access points. 

The opportunities for PBX fraud have grown significantly over the last year, as remote working impacts of COVID-19 mean less people present in offices, and a greater share of private business call forwarding. Compensation for PBX hacking alone costs CSPs RM1.14bil annually. 

Subscription Fraud

Subscription fraud involves fraudsters making fake applications for accounts, using false (and often stolen) information to obtain post-paid subscriptions to telephone services. This is a remarkable challenge for CSPs in a modern digital environment, particularly with growing pressures on digital services resulting from the COVID-19 pandemic.

In its RAFM 2020 Report, RAG estimates that subscription and identify fraud accounts for almost 20% of total annual fraud losses to CSPs, at a global cost of USD8.15bil.

The motivations of fraudsters can significantly influence the impact on CSP revenue. Some fraudsters desire free personal calls and services creating limited revenue loss from bad debt. More sophisticated fraudsters may use subscription fraud as a pathway to profit through reselling contracted mobile devices, call selling, or premium rate service fraud. In cases where identity theft has been utilized for application approval, this also runs the risk of imposing bills on a third-party, damaging brand reputation.

Calling Line Identity (CLI) 

Calling line identity (CLI) or caller identity fraud, sometimes called number spoofing, is a type of bypass fraud which can be used to avoid higher interconnect tariffs and provide a pathway to bypass international call charges. 

This style of number spoofing can also offer a gateway to even deeper financial fraud, as fraudsters use it as a pathway to access private information through voicemail, or even third-party services such as account management of third-party accounts which use only single-factor authentication of phone numbers. This can unlock a route to fraudsters gaining even more crucial private information through third-party accounts that enable them to access critical information such as bank details. 

Evolving fraud risks

Fraud risks continue to evolve, as new innovations such as 5G technologies provide new capabilities and opportunities for CSPs. 

With the advent of 5G technologies, fraudsters will explore innovative new ways to engage in the same types of frauds that are costing CSPs today, using new tools and processes. The sophistication of human behavior attacks will deepen, as improved computing technologies and connectivity allow fraudsters to explore more advanced opportunities. The huge increase in connected devices will create new vulnerabilities and opportunities for fraudsters, at the same time putting increasing pressure on CSPs’ analysis capabilities. 

Neural Technologies’ Optimus Platform provides a powerful suite of RAFM solutions to prevent revenue leakage due to telecoms fraud. The sophisticated solutions portfolio leverages machine learning to quickly identify fraudulent activities and high-risk events, offering automatic triggers that deliver a range of actions such as ending calls, cancelling subscriptions, locking sim cards, and more. This real-time automated response is critical in the high-volume modern CSP ecosystem, with fraudsters often generating significant revenue losses for CSPs in just a short period of time.

With sim box analysis as one example, the Optimus Platform can incorporate a wide range of data indicators such as median time between calls, ratio of call types, SMS and data traffic, constant repeat calling, traffic type, call recipient, then leverage its machine learning capabilities to identify fraud through historical fraud patterns, anomaly models that identify emerging fraud trends and abuse, and cluster models that identify subscribers with abnormal activity. 

Sophisticated link analysis also allows the Optimus Platform to identify high-risk subscription applications that significantly reduces subscription fraud risk. At the same time, digital identification and AI/ML-driven application risk solutions provide fast, accurate, and automated accept/decline/defer decisions, complemented by third-party ID verification, ensuring comprehensive eligibility checks and fraud protection for subscriptions. 

Telecoms fraud represents a multi-billion dollar challenge for CSPs. The six fraud types highlighted above reflect the most pressing threats, but form part of a constantly evolving pattern of fraud by increasingly sophisticated fraudsters. Investing in RAFM solutions like those offered by Neural Technologies provides an equally sophisticated solution to tackle these challenges. In an evolving fraud environment, a fraud prevention solution that adapts offers the best chance to reduce enterprise losses.

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