Fraud: telcos' biggest enemy

Geoff Ibbett, director of product management, Subex Azure
22 Dec 2006

Telecom operators cited fraud as the single largest area of revenue leakage in the recent Operators Attitudes to Revenue Assurance 2006 survey that was conducted by research firm Analysys on behalf of Subex Azure.

Average fraud losses have increased since last year, from 2.7% to 2.9% of turnover. That is equal to more than $44 billion.

Six types of fraud stand out as the biggest sources of revenue leakage.

False identity

Subscription fraud entails setting up a false identity to gain access to network services with no intention to pay for those services, either by creating a fictitious identity or by using the identity of another party fraudulently to pay for those services.

A single fraudster can cause havoc by setting up multiple accounts, thereby racking up multiple bills, or by causing an unsuspecting subscriber to be billed for his usage. Both of these can result in large collection overheads.

To detect this, telcos have to perform customer verification checks, such as credit references and subscriber fingerprinting, that profile behavior patterns so that individuals can be uniquely identified regardless of the credentials supplied.

Preventing subscription fraud starts by confirming that none of the applicant's details are present in any known fraudster list. Telcos can also require an initial deposit and use controls such as credit limits to regulate usage.

False traffic

The simplest version of premium rate services (PRS) fraud involves artificially inflating the amount of traffic to a legitimate PRS service, either manually or by the use of auto-dialer equipment.

This can be detected by monitoring usage patterns and reporting unusual, often high-usage, call patterns to PRS numbers. For example, a sudden increase in traffic for a particular PRS number, especially if the traffic originates from a small number of calling line identities.

Telcos should perform credit and other reference checks on the owners of PRS numbers when they submit an application to help thwart this type of fraud.

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