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I have seen many things during my almost two decades working in the Fraud Management industry. I remember Robin Hood-type fraudsters phreaking signaling payphones for their community to complete calls without depositing coins. Today I am surprised at the sophistication of fraudsters who use man-in-the-middle attack between the phone and the SIM card to avoid international roaming rates.
Our industry has evolved tremendously. How can we forget the simple techniques we used to stop fraudulent calls by programming the switch with a call teardown for every call that exceeds 55 minutes? Today there are various solutions, and impressive new technologies and algorithms allow earlier and more effective detection of fraudulent behavior. There are also at least five specialized global forums that meet every year to discuss these issues

After all this time I think there are some questions that need answers. Who are these fraudsters? Are we winning? What has changed? What can happen in the future?

Call Selling Fraud Evolution

The cost of international calls was always a motivation for fraud. In the past making an international call was very expensive and there was an opportunity for fraudsters to make money. Fraudsters organized a clandestine operator implementing small call centers to resell calls to lower cost carriers using third-party phone lines. The most common methods for reselling calls were cloning fraud, shoulder surfing, remote programming of call forwarding, and clip on. After years of increasing popularity for VoIP and a more competitive market for international carriers, the cost of international calls fell to very low levels, and call selling fraud lost its appeal.

So what happened to the fraudsters? They did not give up on the business of international calls, instead they started buying a range of numbers within small countries in the Pacific Islands and began earning money from traffic associated with those numbers. The more calls received, the more money earned.

This has led to the appearance of new innovative techniques to committed fraud based on enablers such as the usage of fake IDs. International roaming fraud, PBX Hacking Fraud, Wangiri Fraud, Hijacking Number Fraud, Arbitrage Fraud and others evolving from the old Call Selling Fraud to the new IRSF (International Revenue Share Fraud). These are good examples on how the fraudsters have changed their modus operandi to gain money. Moreover today’s fraudsters openly advertise the reward payment and a percentage of revenues for their frauds schemes. Being in the field as I am, you have to agree with CFCA conclusions… IRSF is the elephant in the room.

Bypass Fraud Evolution

The cost of interconnection between operators became another big draw for the fraudster, leading to the emergence of Bypass Fraud. Before the world of VoIP, traffic calls between countries mainly utilized maritime wire, optical fiber and satellite, resulting in high interconnection costs. Fraudsters saw an opportunity in buying voice traffic carriers and delivering by cheaper means such as special channels VSAT (Very-small-aperture terminal) and leased lines. This made it illegal to divert international traffic generally to local fixed lines operator. I remember operators using detection techniques such as aerial surveys to search for VSAT antennas on the roofs of homes.

Today, many years later, we still have the cost of interconnection, but with more than 5 billion mobile phones, there is more traffic than ever. What we see now is the same type of fraud, but is has drastically evolved. There are hundreds of micro-operators worldwide illegally buying and selling call traffic, both voice and data, every day using sophisticated remotely controlled SIM BOXs . Fraudsters can place up to 20,000 SIM cards in these devices to simulate human behavior, making it difficult to detect this fraud. The volume of new replacement SIM cards is so immediate that fraud is difficult to stop. The result? Fraudsters are among some of the most creative creatures on earth and bypass evolved to new variations such as FAS (False Answer Supervision) Fraud, or Skin-SIM Card Fraud for international roaming.

Subscription Fraud Evolution

One type of fraud that has continued to exist without much change is Subscription Fraud, as the techniques of document forgery, impersonation and identity theft ultimately remain the same. There will always be fraudsters who use third parties to commit their crimes (people selling their identities or not imported by a debt). Subscription Fraud will continue to exist for the foreseeable future because of the ease of execution, and because it serves as a gateway to other types of fraud. Previously, fraudsters committing Subscription Fraud had to have a line that could facilitate the resale of calling and other services (roaming, data, broadband, etc.) or to deliver calls for bypass. Today Subscription Fraud is facilitated by dealers and points to the resale of equipment, especially as operators offering a high subsidy become a lucrative business for fraudsters.

The  Future

Today’s fraudster is no longer a Robin Hood. It is not the housewife who fails to use the calls charged under the tariff. It is not the student stealing Wi-Fi from his dorm neighbor, nor the employee that sometimes makes more calls than are allowed from a company phone. Operators must recognize that true fraud scammers are professionals who continue driving highly lucrative business and want to maintain their business for long time.

Our initial question was, “Who are these fraudsters?” We can conclude that we still face the same enemy as we did two decades ago; the fraudster and the type of fraud remains the same. What has changed are the methods used to perpetrate fraud. These have become more complex. I can only imagine the evolution that these fraudsters will make in the future when we jump to 50 billion connected devices M2M using malwares infecting thousands of devices or introducing artificial intelligence algorithms in their SIM Box to void our controls.

The battle must continue, because fraud has become an entire industry that is bleeding the operators. It is up to us, suppliers, to continue to create and deliver innovative solutions that help operators to fence these fraudsters, detecting fraud early and minimizing losses. Operators and management professionals should be aware that fraud has not been eradicated and that there is still much work to do.

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