Telecoms fraud: how to manage and get ahead in 2022

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Kelvin Chaffer, COO at Lifecycle Software, explores the issue of telecoms fraud and what can be done about it.

As fraudulent activity in telecoms continues to plague the industry with no signs of slowing down, it’s no surprise that fraudsters are becoming increasingly skilled in exploiting network operators and customers.

Though not a new phenomenon, the rate at which scammers were able to successfully target providers and consumers was unprecedented during the Covid-19 pandemic. Indeed, a poll taken in 2021 reported that 75% of operators were experiencing new or emerging incidences of fraud and 61% said network security threats have increased or significantly increased since it began. It’s not only providers that are suffering. In the summer of 2021, OfCom found 82% of adults had received a suspicious message, with most reporting that it had come via a text.

The ongoing crisis in Ukraine has also provided scammers with an unparalleled opportunity to exploit the networks, highlighting the need for anti-fraud solutions. Indeed, a BBC investigation has found that online scammers have been using hundreds of fake charity websites to trick people wanting to donate to Ukraine, with mobile operators also reporting a significant increase in calls and SMS to the country.

A new and integrated approach to deal with such a prevalent security threat is therefore required by industry providers, which defends both consumers and businesses if providers are to manage the pervasive threat of fraud.

Know your vulnerabilities

Businesses must begin by turning response measures into pre-emptive ones – only then can telcos know where their vulnerabilities lie. Still, the scale of this challenge cannot be understated, with the industry suffering losses stretching into the billions each year, due to fraudulent calls or scams. A recent report conducted by the Communications Fraud Control Association (CFCA) found that 73% of the surveyed operators said ‘global fraud losses had increased or stayed the same and 66% said fraud had trended up or stayed the same within their company’. As fraudsters become increasingly skilled in their pursuit, enhancing their practices as fast as the next smartphone innovation, telcos must therefore gain better insight into prevention strategies.

The capacity of perpetrators to target multiple parts of a company’s infrastructure has become the most damaging weapon they have in their arsenal, since interferences are especially difficult to detect in outdated or disconnected systems. Such vulnerabilities in the network, for example, create opportunities for scammers to pursue identity fraud, account takeover and payment fraud, with there being far reaching issues including network bandwidth waste, increased support costs, reduced quality of service and reputational damage.

Notably, over the last 10 years there has been a significant increase in targeted phishing and spam messages, as criminals look to exploit and disrupt the networks, affecting subscribers and brands alike, with calls being redirected and SMS messages intercepted in order to funnel illicit funds into criminals’ accounts. Subscriber fraud has also become a serious concern to many telcos, as the products or services gained are often found to be linked to more serious offences, such as organised crime or terrorist networks. By using fraudulent details, scammers are also able to take out contracts with the aim of reselling devices, while a provider is forced to wipe off the bad debt.

Fraud techniques

Techniques like SIM Farms are being used widely by scammers to exploit free services to reap payment, sending out hundreds or sometimes thousands of SMS messages with the hope of obtaining personal details from a handful of unknowing recipients, merely attempting to guess number ranges or personal details. The information can be used for SIM swap, a form of digital identity theft where the attacker takes over a mobile phone number to intercept one-time passwords and get access to bank accounts, social media accounts or crypto wallets. T-Mobile was the most recent provider to be hit by attempted SIM-swapping attacks and code theft by the extortion gang, Lapsus$.

The phishing SMS techniques are increasingly more sophisticated. Recently, the most common examples come in the form of mass-scale SMS alerts to promote fictitious campaigns to provide financial aid to Ukraine. Phishing scams were also increasingly prevalent during the COVID-19 crisis where fraudsters targeted the public with fake vaccination bookings and requested payment.

The nexus of the victim in fraudulent cases makes things increasingly murky for regulation and the impetus to regulate. SIM swapping also continues to be a sticking point for telcos and consumers alike because it is such easy territory for fraudsters. Without a regulatory law in the UK that imposes a compulsory requirement for individuals to provide identification when purchasing a SIM, the identity threshold for operators will remain low, perpetuating the issue as the incentive to go through what’s regarded as consumer ‘red tape’. If only some providers are willing to ameliorate the issue, customers will go where convenience trumps and some telcos will lose out on business – an unlikely and unfair solution. Therefore, if more is done from a policy and legislative perspective, telcos will have better means to pre-empt than respond.

The ability of scammers to use a network’s service for fraud is a concern for telecoms due to the worry that by not providing suitable services they will damage consumer confidence and long-term customer relationships. One of the most common telecom frauds affecting customer’s experience is the use of robocalls, in which a computerised auto-dialer is used to call a list of numbers. It will then deliver a prepaid message, often in the hope of getting the victim to unknowingly call back a premium telephone number. A recent variation of this scam is to use a localised number and let the phone ring once before hanging up, in the hope that due to curiosity the victim will call back.

Spotting and eliminating attacks

Until then, a pre-emptive approach is needed by telcos to anticipate the increasingly clever tactics deployed by scammers. The introduction of zero rate calls exists as a clear example where preemptive measures have been needed and utilised, not least currently with the Ukraine war and ongoing crisis. We’ve seen a 2500% increase in calls & SMS to Ukraine, so now is the time for, telcos to double down on their efforts in fraud detection and fair usage policy control, for their customers, as well as to monitor the network and partner data sources supporting the detection of abnormal situations, enabling them to act on suspicious activity.

Advanced algorithms to scout networks in real-time and pinpoint SIM cards and devices with abnormal or suspicious usage patterns are equally crucial. Telcos that are winning in this fight have been monitoring thousands of indicators like abnormal volumes of traffic in a specific location, devices that sent thousands of SMS with a link, IMEIs with exceptionally high data consumption and devices with several SIM cards associated within a short time. The need to proactively counteract fraudulent behaviours with automatic workflows to terminate, block transactions, or suspend a subscriber in real-time has also never been greater.

Educating customers and protecting telcos

A blended approach where customers are better educated is essential – ironically even more so for younger demographics like Gen Z’s and millennials, with reports claiming that one in four UK 18-34-year-olds would trust scam messages – more than double the proportion of over-55s.

While the technology within our smartphones keeps evolving, so will the tactics used by scammers to steal personal details and finances. It is therefore vital to deploy the right fraud management in telecoms, to protect the organisation and their customers against these increasing fraudulent threats.

Telcos now have access to innovative tools such as predictive analytics and real-time decisions to monitor their subscriptions. Artificial Intelligence is a powerful ally to monitor networks, detect abnormal patterns and trigger workflows. The intelligent algorithms are constantly improved to keep up the pace with the attack attempts.

By using directive workflows, they can create a system that can react in real-time if any fraudulent behaviour is displayed, meaning providers can immediately flag, block or suspend them from the network and prevent revenue leaks.

Similarly, it is now possible to monitor a customer’s behaviour and keep ahead of any unusual behaviour that may indicate they are not in control of their device. It is these types of preventative measures that can ensure that customer accounts have not been compromised, protecting both them and the network itself.

By adopting these tools, operators are able to counteract fraud and improve security on three levels: ensure stability and safety throughout the entire network, protect individual customers from scams and avoid revenue leakage that may occur due to security breaches and fraud.

Kelvin Chaffer is the Chief Operating Officer at Lifecycle Software. With a software engineering background and an ever-growing passion for technology, Kelvin is known for driving growth and innovation in the product portfolio. He has worked at Lifecycle for 20 years using his positive attitude and tireless energy to inspire everyone. In his spare time, he runs ultra-marathons.