The evolution of telecom fraud and the impact on revenues
In the last three decades, the telecommunication industry has evolved dramatically – from analog telephone lines to digital quad+ play mobile service providers. Today, the telecommunication sector is entering the 5G landscape promising unmatched connectivity and bandwidth.
Technology evolution has spiked the range of available opportunities as well as competition, and unfortunately, malpractices too. Cybercrimes are on the rise as vulnerabilities get exposed. Telecom frauds have become commonplace and need to be addressed on priority as estimates peg their cost at €29 billion per year.
Evolution of Telecom Frauds
The Telecom industry is seen as young, but if we look for the very first telecom fraud, it will take us two centuries back. The first telecom fraud was committed in the 1830s by two French brothers – Francois and Joseph Blanc. The brothers were bankers working at the stock exchange in Bordeaux – primitively trading in government bonds. Owing to the fragmented telecom sector back then, the Blanc brothers found a way of sending messages by “hacking” the telecom network, thus opening the gates to telecom frauds.
Since then, the telecom industry has obviously evolved. Numerous new technologies have been introduced for fraud detection in the telecom industry. But as is always the case, as telecom service providers have gone smart, similarly, telecom hackers too have become proficient.
Today, there are a series of common telecom frauds being reported worldwide. These impact the revenue potential of telecom service providers and hurt customers too.
Let’s understand some of the common telecom frauds the industry is facing:
- Traffic Pumping Scheme
It is a revenue-sharing scheme designed by fraudsters who promise to increase traffic to a specific level at a high destination cost. The signature style of this telecom fraud type is to spike traffic to high-cost destinations. Fraudsters take advantage of telecom service provider’s lax security practices. These frauds often leave service providers with large monetary losses. These kinds of attacks often occur during holidays and weekends when networks aren’t monitored closely due to surges and reduced staff loads.
- Vishing Calls
This is one of the most common telecom frauds, which is a combination of the word “Voice” and “Phishing.” It is similar to the phishing email attacks – the difference is just that fraudsters make calls to the victims. During the vishing calls, fraudsters create a false scenario and trick victims to share their personal, security, or financial information. In some situations, fraudsters even compel victims to transfer money to them. These types of fraud are very hard to detect, and catching fraudsters is even harder.
One-ring-and-cut or Wangari
Wangari is a common scenario in the telecom domain. It is a telecom scam where hackers lure victims to call premium-rate numbers. In this method, fraudsters set a system of a large number of random telephone numbers. They call each phone number up to one ring and leave a missed call on the recipient’s phone.
Usually, when people see a missed call from an unknown number on their phone, they call back, considering it a genuine number, and get their entire call balance lost on calling the premium rate number. It is a very cunning and well-organized telecom fraud practiced around the globe.
International Revenue Sharing Fraud
International Revenue Sharing Fraud, or shortly referred to as IRSF, is one of the most damaging telecom fraud schemes to date. Under this fraud, money is transferred from one carrier to another based on the inter-carrier trust between telecom operators. IRSF telecom fraudsters are very smart; they wait for logs to expire before executing the next step in their money-laundering scheme.
According to the IRS, more than 1,029,601 Americans have received IRSF fraud calls, and approximately $29,100,604 had been lost on these calls in 2016 alone. On the global level, numerous awareness programs and events are organized to protect people from these scam calls, but this telecom fraud is still flourishing.
Call Forwarding Fraud
In this VoIP telecom fraud, criminals gain access to an enterprise PBX system, which they use to make expensive long-distance calls and pocket what they charge to the users. Generally, telecom service providers state that customers are liable to pay for fraudulent calls. But, in reality, it’s hard to make the customer pay for the fraud calls as they could simply disconnect network services and move to another service provider. And all the fraud call financial burden falls on the service provider’s shoulder.
How are telecom frauds impacting revenues?
The global loss due to fraudulent practices in 2019 was $28.3 billion, and telecom fraud has a big share in it. Some of the top fraud types have been payment fraud, IP PBX fraud, abuse of network or device, or configuration weaknesses, and IoT fraud. As it happens, with the explosion of smartphone technology, the number of telecom frauds has also seen a spike as new venues and vulnerabilities open up. In the app-economy, a lot of customer validation happens through mobile phones and SMS networks now. In that scenario, Account Takeover frauds are now becoming very common with targeted consumer attacks.
Additionally, as per the Cyber-Telecom Crime Report 2019 published by Trend Micro and Europol, the evolution from switchboard operations to the circuit and packet-switched operators has added to the telecom fraud occurrences causing losses of $33 billion revenue loss each year. The report also reveals that traditional financial criminals are the ones turning their attention to telecom scams. The report has suggested that developing or failed nations are the main originators of telecom fraud that is perpetrated in developed nations like the USA or UK.
In a nutshell, telecom frauds are unfortunately common as they have continued to evolve at pace with telecom technology. These myriad frauds have shown the potential to adversely impact the revenue of telecom service providers. Also, along with revenue loss, this scenario is also tarnishing the reputation of telecom companies.
Clearly, it is extremely important for telecom service providers to invest in fraud detection and security technologies. The good news is that by partnering with the right telecom solution provider, fraud can be easily detected and avoided.