2. Agenda
g
Background
Fraud-Definitions
Different Forms of Revenue Fraud
Fraud Prevention Methods
Conclusion
Recommendations
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3. Why?
y
Background
◘ Revenue F d against
R Fraud i t
licensed telecom operators
What is visible is just
the tip of the iceberg……..
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4. $$
Commercial Magnitude of Telecom Fraud
◘ $50 Billion 2004
Billi
◘ $60 Billion 2006
◘ Estimates
E ti t vary but probably stable around $50 - $60 Billion
b t b bl t bl d Billi
per annum worldwide according to a 2008 report of CFCA
◘ The fraud tends to increase during recession
◘ A value of up to 6% of total company revenue is not unusual
in US
◘ In recently liberalised markets the figures are up to 20%
Source: CFCA: Communications Fraud Control Association (CFCA)
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5. $$
• Middle East
> President of Telco confirmed over US $400million loss in 2006
• Mid Asia
> Regulator and others publish loses over US $500million in 2006
• North Africa
> PT&T measured loss at US $400million in 2006
• Sub Sahara Africa
SubSahara Africa
> Measured at over US $60million losses in 2005
• Central America
> Government officially recognizes loss over US $100million in 2006
• Europe
> VoIP bypass calls exceeded $3bn in 2005 to Africa
b ll d d$ b 5 f
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6. $$
• Pakistan
> No formal study carried out
No formal study carried out
> Estimates differ by vast amounts
> In the range of 3 5 billion PKR
In the range of 3 ‐ 5 billion PKR
annually (35 – 60 million USD)
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7. Why?
y
Effects of revenue losses occurring from fraud
> Reduced revenue to Licensed Telecom Operators by
free/cheaper call offering by illegal telecom operators;
stealing current and future revenues
g
> Loss of taxes and levies to the government exchequers
(which are based on telecom operator’s revenues)
> Financial loss to regulators (regulators are normally funded
on a percentage of annual licence fees from licensed
operators). Same for ICT R&D Fund and USF.
> Telcos may end up paying PRS partners for fraudulent calls
> Security threats posed by absence of lawful interception and
non availability of caller identity information
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8. What is Fraud?
Fraud
> “Intentional misrepresentation or concealment of information
“I t ti l i t ti l t fi f ti
in order to deceive or mislead.”
Telecom Fraud
> According to CFCA the use of the telecommunications
CFCA,
network with the intention of avoiding payment
• without correct payment
ith t t t
• with no payment at all
• someone else pays
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10. Characteristics of Telecom Fraud
> Telco fraud seen as victimless
> Crime committed remotely - minimises detection risk
> Often,
Often no equipment is needed
> Easy conversion to cash - eg call selling
> Telecom products are complex and become more so with
further interactions with other products
p
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11. Types of Revenue Frauds
yp
> There are more than 200 types of frauds and the number is on
the rise
> We briefly discuss only the most common types here
• Subscription Fraud
• Teeing-in or Clipping on
• Internal Fraud-Magic Phones
• GSM Interconnect Bypass
• GSM International Gateway Bypass
y y
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13. Subscription Frauds (Mobile and Fixed)
p ( )
> Customer has No Intention to Pay
> Customer misrepresenting his/her
identity (e.g. stolen electricity bills)
> Use of forged salary slip to get high
credit li it
dit limits
> Misuse of value-added, international
roaming and PRS services
g
> Initial bills are paid on time “sleeper”,
followed by heavy usage - default to
pay - forced churn
> Appears like bad debt
> Almost always associated with call
selling
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14. Teeing-
Teeing-In or Clipping On (Fixed Line)
> Connecting an instrument “box” parallel
to the telephone line
> Divert the stolen line to fake subscriber
> Legitimate user loses connection on
and off when the fake subscriber is
using the line.
> May also be used against Public
yp
Payphones
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15. Internal Frauds (Mobile and Fixed)
( )
> All telecom networks face the risk
of being compromised from within
> Providing value-added services to
customers free of cost, un-
authorised bill adjustments and
discounted tariff to customers
> Temptation of financial gain; or
disgruntled employees may take
their revenge
> “Magic phones/SIMs” employ
Magic phones/SIMs
network vulnerabilities to provide
certain services free of cost or to
charge 3rd party for the services
used by the magic phone user
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16. GSM Interconnect Bypass (
yp (Mobile and Fixed)
)
> Corporate customers use intelligent PBX to bypass the
interconnection costs for Fixed to Mobile calls
> The intelligent PBX can sense the number being dialled and
doesn’t route it through fixed lines but through SIM box
containing SIMS of the CMO being called.
t i i SIMSs f th b i ll d
> Calling from fixed terminal but CLI of called mobile shows the
incoming call from mobile number (on-net call)
> The mobile number seen on CLI cannot be called back …!!!
!!!
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17. GSM Interconnect Bypass (
yp (Mobile and Fixed)
)
> Illustration
Both outgoing No incoming call
g
and incoming
20 CMO lines
5 fixed (each CMO
lines selected)
0345-XXXX
calling
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18. GSM Interconnect Bypass (
yp (Mobile and Fixed)
)
> Cost savings for corporate fraudsters and revenue losses to
telcos are huge
> For a 30 second call to Mobile
• Ordinary fixed line charges = PKR 2.5 (excluding tax)
25
• Using interconnect bypass cost = PKR 0.63 (excluding tax)
• Saving / loss of PKR 1.87
PKR 1.6 Loss to fixed line operator PKR 0.27 Loss to CMO
2.5 – MTR (0.9) = PKR 1.6 tariff – MTR (0.9) = PKR 0.27
> Actual losses are even higher because of corporate discounts
negotiated by such clients
> On-net
On net calls are also free in certain situations
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19. International Gateway Bypass (
y yp (Mobile and Fixed)
)
> Illegal gateway exchange terminate voice over internet protocol
(VoIP) International calls over public switched telephone
network (PSTN) or over the GSM network
> Bypassing the legal International Gateways
yp g g y
> Fraudster receives international calls from foreign countries
over VoIP (through an ISP)
> Illegal operator collects revenue from foreign callers
> Losses to telcos
• LDI operator loses foreign revenue from carriers
• LL operator loses APCL
• Mobile operator loses MTR
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21. Fraud Prevention and Management
g
> Finding telecommunications fraud in masses of call records is
more diffi lt th fi di a needle i a h
difficult than finding dl in haystack.
t k
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22. Activities Required resources
• Risk assessment review • Expertise in telecom
Min
• Define fraud management policy fraud management
• Create awareness regarding
g g • Expertise in risk assessment
p
fraud & its management
• Perform customer vetting & Cr. • Tools to support authentication,
rating Internal Cr. Rating & exposure
• Set alerts based o Usage, C
a e ts on Cr. Security • Experience of use of techniques
Exposure, dealer performance & tools to manage telecom fraud
• Tighten data & network security
• Maintain audit trails
• Capability to process CDR
Fraud prevention to generate alerts
• Process CDRs & monitor
alerts and usage reports • Alerts monitoring experience
• Reconciliation audits
• Fraud analysis
• Analyse alerts Fraud detection experience
• Investigate • Knowledge of
Max
fraud & impact law enforcement
• Take action Fraud investigation & prosecution
COST
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23. Fraud Detection
> An average mobile p
g phone operator p
p produces 250 million
CDRs every week. (CFCA estimate)
> Gigantic d t b
Gi ti databases; l
large d t warehouses
data h
> Fraud Management Systems (FMS) rely on complex data
mining techniques
> $$$
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24. Conclusion
> Revenue Fraud is a reality
> This menace is continuously on the rise
> It is not only affecting the telcos but the regulator and
Government as well (since tax receipts and other subscriptions
are based on teleco revenues)
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25. Recommendations
> Incentivise CMOs, being the biggest markets takers, to invest
in FMS
> Possible funding source % share from APC which must be
spent on FMS for international bypass detection
> This investment will be recovered when CMO revenues
increase and consequently the subscriptions and levies
received from CMOs are increased
> Further benefits will emerge from shared responsibility of
bypass detection between PTA and CMOs
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26. Thank you for patience……..
Questions
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