Telecoms industry is losing $17bn to fraud every year

24 Oct 2018496 Views

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The financial impact of telecoms fraud is massive and it could soon impact everyone.

In the past, telecoms fraud was rarely discussed by the industry because of fears of inspiring copycat crimes. It was often referred to by insiders as “the telecoms industry’s dirty little secret”.

But now, with the increasing spate of crimes impacting consumers – including ‘Wangiri fraud’, whereby mobile customers are enticed to return a missed call at a huge cost – the secret is out.

Siliconrepublic.com previously reported on instances of private branch exchange (PBX) fraud whereby telecoms devices in businesses could be easily hacked using a combination of codes. Unsuspecting businesses could end up with bills worth tens of thousands of euro as their phone systems are used to enable calling card scams around the world.

The cost of telecoms fraud

The latest estimate on the cost of fraud to the telecoms industry was revealed at the International Telecoms Week (ITW) Global Leaders’ Forum. According to the Financial Times, fraud is costing the industry $17bn in lost revenues every year, with the proceeds being used to finance organised crime and terrorism.

According to the ITW, frauds that have been tracked have led a trail to Al-Qaeda as well as organised crime in Pakistan and a money laundering case in Italy. Improved processes and policing of their networks by telcos have seen the amount of revenue lost to fraud decrease substantially from 5pc in 2005 to 1pc last year. However, the threat is likely to gain fresh legs as the telecoms industry moves from the voice world to a world where billions of internet of things (IoT) devices could be hacked and hijacked to divert revenue to the wrong coffers.

One particular area of fraud is international revenue share fraud (IRSF), which occurs when fraudsters use stolen SIMs or SIMs obtained using false identities to take advantage of international premium rate numbers and rack up millions of euro worth of of cross-border calls, which operators are obliged to pay termination fees for.

In 2015, the Communications Fraud Control Association (CFCA) commissioned a report that found an increase of 497pc in IRSF, which cost more than €10.7bn in 2014 alone.

An Irish company called Xintec belongs to the new generation of cybersecurity players that has emerged to tackle the problem by discovering a way of tracking fraudulent numbers through databases. Its technology has been deployed by operators such as Vodafone, Orange, KPN and by Denis O’Brien’s Digicel to cut down on IRSF fraud.

The most high-profile instance of telecoms fraud in Ireland occurred in 2003, when a Comptroller and Auditor General report revealed that the Department of Social Affairs was defrauded to the tune of €300,000. In one weekend alone, an overseas crime gang that had hacked into the department’s PBX racked up calls of €12,000.

In another case, an unidentified business in Dublin was one of the victims of a PBX fraud attack by an organised crime gang, which hacked in and made international calls. The owners of each of the PBXs had substantial carrier bills to pay, particularly the final PBX, where costs of more than €75,000 were run up on a weekend. The destinations of the calls were in India, Pakistan and Africa.

As we enter the IoT world, the victims won’t only be telcos and businesses, but unsuspecting consumers, too.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com