Dial F for fraud

By In their hunger to attra | 08 Aug 2003


New Delhi: Of late the telecom operators in India are waking up to the grim reality of the fraudulent customer. The recent uncovering of a foul play at Hutchison, in Delhi, where global roaming cards were issued to a rogue customer, in active connivance with an employee of the firm, brings home the fact that telecom fraud has arrived in India — and in a big way.

The act cost the company close to Rs 90 lakh as lost revenues. Had the Delhi Police been a bit late in busting the operation AirTel, too, might have been poorer by a few millions as the fraudsters had an inventory of similar cards of AirTel also.

In order to notch up a huge subscriber base, the private basic service companies and cellular operators in India have been loath to scrutinise customers thoroughly and hence are poised to soon overtake other Asian nations in the percentage of revenue being written off as irrecoverable because of billing frauds.

Countries like the Philippines have developed notorious reputations due to the widespread prevalence of telecom fraud. Competition is a major factor, which has led to the high growth in telecom frauds as service hopping is painless when rival companies are eager to increase their subscriber bases without proper screening and lack the willingness to check the reasons for switching from the previous operator.

A global phenomenon
An avid watcher of the sector says India is already at par with the other Asian nations with over 10-per cent of revenue being sacrificed to frauds — and the trend is in the upswing. Paying for services is not a habit with the Indian consumer, so if this growth goes unchecked it will just be a matter of months before India leaves other Asian nations behind.

The annual telecom revenue loss worldwide ranges between 2 per cent and 20 per cent. One Delhi-based cellular operator, on much cajoling, revealed an average loss of Rs 75 per subscriber due to fraud as against a mean average revenue per user (ARPU) of Rs 600 per month. Such losses are non-performing assets or bad debt.

International telecom analysts say fraud costs up to $35 billion annually. No longer can businesses consider fraud a normal cost of doing business. Fraud reduces profits, affects good customers and hinders operational efficiency.

The real costs are much more than the lost revenue; it also includes diversion of resources and unwarranted capex due to undue network investment. Fraud erodes network resources, undermines public trust, damages corporate image and reputation and flogs the stock value of the operators.

It isn't simply revenue foregone because the telephone company is still required to pay other telecommunications companies for the use of their network in the origination, termination and transport of fraudulent calls. So the company incurs costs for the services used but collects no revenue to offset these costs.

A lucrative dealing
Fraudsters benefit financially by using service without paying or by 'call selling' to others (as in the Hutch case). These are the two most common cases. Losses to operators in the first instance are usually hundreds or thousands of rupees per case; this form is often referred to as subscription fraud.

These customers are like bloodsucking leeches that siphon off fat revenue from an operator then churn in search of their new victim. Telecom companies all over the world say they have been duped by subscription frauds where a person opens an account under a false name, uses the service and flees. Subscription fraud is also the ordering of phone service without intending to ever pay for it. Once the service becomes operational, massive usage follows for a brief time, after which the 'subscriber' vanishes.

The latter form (call selling) is more sinister and is usually an organised play. This is where white-collar criminals sell high-value calls at a substantial discount to other people. This is commonly organised on an industrial scale, is streamlined and is of an international scope. In the Hutch case the cards were bought in Delhi and sold in remote Kochi and further used from the US.

There are several modes of 'call selling.' Typically, these fraudsters use call diversion facilities where many simultaneous calls can be billed to the same line, to maximise the return before the line is disconnected. Calling card misuse and 'line porting' are also common ways in such a scenario. This scam occurs when a customer's phone is call-forwarded to another location.

Hi-tech fraud work
These phoney operators employ professionals who are well paid for cracking access codes to obtain entry to end users' on-premises PBX systems too.

These hackers use equipment ranging from war-diallers to more sophisticated software and hardware, easily gain valuable authentication codes and calling-card numbers, which are also stolen through a number of other techniques like dumpster diving or 'shoulder surfing.'

This consists of a thief either observing the customer entering the calling card number on a payphone keypad or overhearing the customer provide the numbers to an operator. The observation of numbers being entered can take place from locations close to the payphone or with the use of binoculars. There have been instances of the observation being recorded with the use of a video camera.

The strategy to combat telecom fraud can be a three-pronged: the creation of a nationwide online database of fraudsters accessible to all the operators, stringent identity and credit verification, and the implementation of cutting-edge fraud management systems (FMS).

Taking a cue from the banking industry where loan defaulter information is readily available to all banks the telecom operators, likewise, must share the database of defaulting customers with each other.

Getting the act together
Cellular Operators' Association of India (COAI) is toying with the idea to take defaulting subscribers to task by initiating an online database that will contain CLI information, fraud code, description, posted by operator and date of posting.

The information can be used by service providers to decide how to respond to a new subscriber. A 'black list' code can be made in such database with the name 'special account' for defaulting accounts. When an operator signs up a new customer the 'black list' code appearing in database will automatically be matched and the subscriber can be rejected if found figuring in the list. Furthermore, prompt legal action may be initiated against him by a regulatory body like the Telecom Regulatory Authority of India.

A comprehensive identity and credit verification system should also be mooted by all operators in a collaborative effort to benefit all the elements of the telecom sector. This will go a long way in checking the menace of fraud.

Once all the other checkpoints fail technology remains the final resort to weed out fraud customers. What makes an FMS unique is its adaptive profile-based learning process, which detects changes in the usage pattern and sends alerts upon detection of new possible fraud methods. FMS extracts subscriber information from external third-party systems such as billing and customer care.

Countering mechanism
By presenting subscriber information on a single screen, FMS facilitates timely and accurate decision-making on whether a suspected activity is fraud. A robust FMS responds to a suspected fraudulent activity in real time, including automatic or manual call termination, selective blocking and line restriction commands and tracks usage by destination (domestic, international, high-fraud countries) or by billing entity (authentication code, calling card, toll-free number and customer).

FMS monitors those numbers, which have been showing high usage for some time. Such calls in a maximum number of cases amount to frauds. It aids wireless and wireline telecom players to eliminate fraud through the use of subscriber profiling techniques and advanced analytical capabilities.

Let's hope that this troika minimises telecom fraud to a large extent in our country.

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