Fraud in the telco industry

The telecommunications sector is facing new challenges and changes. There are many types of fraud that haunt this sector. Therefore, it is important to know what dangers it faces and how identity verification can help this sector to mitigate risks and damage to its reputation and economy.

Here we review the main ones:

Types of telecommunications fraud

1- International Revenue Sharing Fraud (IRSF) 

The so-called international income sharing fraud or IRSF fraud, refers to the scam of premium phone numbers. 

The criminal rents an international premium phone number. He then logs into a company’s phone system and makes calls to that premium number (that is, he calls himself at the victim company’s expense).

The company-victim will have to pay large amounts per minute (according to the rates of the premium phone). The scammer will take a large part of this fee (usually around 25% of the total).

More info about this type of telco fraud.

2- SIM box fraud

In this telco fraud, SIM cards from a local operator (illegally obtained) are used.

Through SIM boxes or “GSM links”, the scammer redirects international calls to the victim-operator’s network as if they were national calls (made by their customers). In this way, the fraudulent user obtains the difference between the rate of the international call and the rate of the national call.

If telemarketers don’t catch on, it can cost them millions in lost revenue per year.

3- Stolen credit card deposit fraud

As the name suggests, stolen credit card deposit fraud directly affects deposits made with stolen credit cards.

Fraudulent users use these cards for online purchases and fake deposits, forcing affected businesses to refund fees in the form of chargebacks. 

4- Subscription fraud

False subscriptions to earn money are also the order of the day. In this type of telco fraud, the attacker is dedicated to signing service subscription contracts using stolen IDs and stolen credit card numbers. 

5- Impersonation

Telecommunications companies that offer online user accounts can be subject to an ATO or account takeover attack. In this attack, fraudsters hijack the identity of third parties, more about the phishing.

6- SMS Phishing

Smishing or SMS Phishing is the order of the day and it is also a type of telco fraud that can be very dangerous for companies.

The objective of this massive sending of SMS is to obtain personal information from the recipient of the messages. Considering that in 2020 alone this practice increased by 328% in 2020, it is important to act. For this reason, a system that allows monitoring of records and transactions can be key.

7- Telecommunications arbitration

This telco fraud benefits from capitalizing on price differences. It occurs when the attacker claims to connect directly from country A to B, when they go through a country with a cheaper rate to connect the call.

8- PBX hacking

Using PBX Hacking, fraudsters can control phone lines through unsecured phone networks. PBX is a private telephone network that connects to external networks, allowing businesses to share lines and reduce the numbers they need. 

Being mostly IP based, it can be an easy target for hackers. Therefore, it is important to carry out good internal controls and improve password security.

9- Traffic pumping

Traffic pumping or access stimulation consists of a practice in which local exchanges take place where they manipulate the number of calls to their networks to benefit from the compensation rates established by the US FCC.

Telecommunications companies such as Sprint, Verizon and AT&T pay rates to rural operators. So they try to increase the number of calls and thus get more payments. 

10- Wangiri’s Fraud

Comes from Japanese and means “one and cut”. It is based on arousing the curiosity of customers by letting the phone ring once and hanging up. Then the customer calls back and behind it is an expensive premium number. It is another practice that is totally the order of the day and, of course, affects telco companies, which ultimately will have to bear the costs of the scam.

11- SIM exchange

SIM Jacking or SIM Swapping allows scammers to take control of a person’s SMS and calls by changing their phone number to another that the scammer has under their control.

What opportunities does identity verification offer to telco companies?

In addition to preventing the above frauds, telcos can benefit from identity verification to ensure the identity of their legitimate customers; which translates into a more efficient and faster service in the form of:

Faster registration of new clients

The main use of identity verification in the telecommunications sector corresponds to the possibility of contracting new lines, products or services. 

Years ago, the services of telecommunications companies were not purchased online, but over the phone or in physical stores. However, times have changed. Thanks to new technologies it is possible to carry out these contracts online and safely. It is no longer necessary to go to a physical store or call by phone to contract the line, but it can be done remotely and online. It is enough to have the identity document at hand and take a selfie for the system to verify that the person is who they say they are.

Simple client authentication

Identity verification applied to telco companies allows already verified users to authenticate in a simple way to access a certain service or platform.

All this without the need to write passwords or have to remember them, just authenticate via selfie to guarantee safe and error-free access, through secure biometric technology.

Barrier against fraud

By verifying the identity of users, companies make sure that behind it is who they say they are and not a possible false identity.

How to implement identity verification in the telco industry?

When implementing identity verification, it is important to do so with a company that has a reliable and functioning system that is error-free and scalable.

At Alice Biometrics we make the more advanced online identity verification. The best solution for companies to continue offering their users new options completely remotely, all while:

• Business grows faster
• Any attempted fraud is detected
• Compliance with global regulation

Remember that before adopting these changes you can try a free demo to see the potential. Book here!