13/10/2014

Fraud in the telecommunications industry – part 1

This is part 1 of a 2-part technical briefing by SmartIPX on the subject of fraud in the telecommunications industry.

The background to this document

Telecommunications fraudTelecommunications is an attractive target for fraudsters as telecom fraud is a lucrative criminal business.

The Communications Fraud Control Association (CFCA) 2013 global fraud report estimated an annual loss of USD$ 46.3 billion, a 15% increase from 2011 report.

This equates to an approximate 2.09% of telecom revenues (USD$ 2.214 Trillion) worldwide.

Most worryingly, the % value of fraud losses vs revenues increased between 2011 and 2013, meaning that fraud losses grew faster than revenue.

Is your network “where the money is” for hackers? Are you concerned about the security of your network and worried about the impact fraud will have on your business? You don’t have to be.

Deployed at the network border, Session Border Controllers (SBCs) cover capabilities such as signalling and media security, service-level agreement assurance and regulatory compliance. These capabilities ensure that voice, video and data communications sessions are controlled, managed and protected in a carrier-grade manner.

To prevent “bank robbers” SBCs are the most secure, seamless communication platform on the market today.

At SmartIPX, we understand the fraudulent activity and we also know that in most cases you can’t just stop it dead. No fraud prevent system is fool proof. What you have to be is constantly vigilant to fraud within your network and be proactive in your responses to cases of fraudulent activity.

We are specialists in fraud detection and intervention at an early stage to minimise your losses. This technical briefing is an introduction to the complex and changing arena of telecommunications fraud, covering the scope & types of fraud and what you can do to minimise your losses.

The scope of fraud in the telecommunications industry

Fraud in telecom industry may be described as any service obtained without the intention of paying.

Toll-fraud and phone hacking is a multi-billion dollar industry; in fact, it is more than double that of credit card fraud.

According to the Communications Fraud Control Association 2013 survey, fraud departments reported, on average, 117% more cases per month since 2011 – most heavily impacting North American and Western European providers. Greater than 75% of respondents reported 51 or more fraud incidents per month, with 24% reporting more than 1,000 incidents.

Most respondents (70.5%) believe that global fraud losses are still trending upwards with the transition to an all IP or VoIP environment.

Fraud is a risk that providers understand – and expect. Although most operators have increased measures to minimize fraud and reduce their losses, criminals continue to abuse communications networks and services. Therefore, operators tend to keep their actual loss figures and their plans for corrective measures confidential.

Deploying Session Border Controllers (SBCs) will help protect their networks from unauthorized access and theft. In fact, 88% of service provider respondents in a 2012 Infonetics survey rated security as the most important SBC function, however, monitoring of that network is then critical to winning the battle against the fraudsters and protecting customer relationships.

The survey reported 9 fraud methods or types responsible for more than USD$ 5 billion in losses each:

Cost of Fraud to the Telecommunications industry

Cost of Fraud to the Telecommunications industry

Our emphasis at SmartIPX is more on the communication service provider and their customers, so we focus more on Wholesale, PBX Hacking, Identity Theft and VoIP hacking fraud attempts.

VoIP fraud is a particularly new and significantly growing problem. Fraudsters often attack during weekends and fraud events often go undetected for many hours. VoIP fraud can affect any organization which uses or sells VoIP services and comes from all over the globe.

Traditionally, Africa has been a common target for telecom fraud, because the termination costs are very high and regulation is not as stringent as in other parts of the world. However, a 2011 study from the CFCA found that the top 5 countries from which fraud originates are the United States, India, the United Kingdom, Pakistan, and the Philippines.

The top five fraud terminating countries were Cuba, Somalia, Sierra Leone, Zimbabwe, and Latvia.

In part 2 of this technical briefing, read more about how end-clients are affected along with best practices for monitoring for and responding to fraud.

Fraud, Technical briefing

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