Combatting Fraud Within the Telecommunications Industry
Posted: Sep 18, 2019
The financial implications of fraud within the Telecommunications industry are substantial and have the potential to impact every aspect of the industry from Telcos to end-users. Fraud within the industry is not a recent development. Previously there had been a reluctance to initiate wider discussions outside of the confines of the industry due to fears that it could lead to potential criminals emulating the crimes of others.
It has been estimated that the cost of fraud to the industry is $17bn in lost revenue each year, with the proceeds being directed towards the funding of organised crime and terrorism on a global basis. However, due to telcos taking action aimed at mobile fraud prevention through improving processes and better policing of the networks, the percentage lost to fraud has actually reduced from 5% in 2005 to 1%. Despite this, there is an urgent need to address device theft and fraud to enable the industry to focus on future challenges as new sources of fraud appear with the emergence of new technologies.
The Telecommunication Industry's standard business mode, especially within Europe, leaves it susceptible to fraud. It is possible for users to receive a high-value device model upon signing a new contract and then pay in monthly instalments over the course of 12-24 months. This contract model has long attracted the attention of fraudsters who are able to utilise a data breach and use a victim's stolen account details to order and collect the phone and then sell the phone on the black market for a significantly-reduced price.
While this model does pose the risk of encouraging fraud, it is favoured by end users as it enables them to spread the cost of a new, high-end device. Therefore, focusing upon combatting fraudsters and developing smartphone theft protection capabilities is imperative for the industry and should be explored and embraced by mobile network operators on a global basis.
However, fraudulently-obtained devices are not acquired only in this way. There are various points in the supply chain and device cycle where they are stolen, including during the shipping process and criminal break-ins and stealing them at the point of sale.
Considering the figures involved and the impact upon a range of individuals from MNOs through to end-users, it is imperative that the issue is resolved to avoid long-term damaging long-term repercussions for the industry. There are methods available that can be employed to reduce the amount of fraud within the sector.
' Kill switches ' provide end-users with the possibility to deactivate their device if it is stolen and so prevent it from being used by thieves. This has proven to be very successful in the state of California where it has assisted in reducing smartphone thefts by a half. However, while it may well be attractive to end-users, MNOs remain reluctant to embrace the technology due to the fact that has the ability to impact upon revenue. In addition to this, there is also the fact that as mentioned previously the act of theft actually happens prior to the device being acquired by the user and the device being activated.
Manual Unlock Codes
The majority of mobile carriers are still continuing to implement manual unlock codes on devices to prevent them being used across a range of mobile networks. However, an increasing number of users are seeking out unlocked devices in order to ensure that they are not restricted by a sole network operator in the future. While it is possible to request that the device is unlocked after the contract has finished, anyone who has done this will be aware that it is a time-consuming process and, and most importantly, it does not fully combat fraud.
Experienced hackers and fraudsters have the ability to unlock the devices and it is possible to acquire unlock codes relatively straightforwardly if desired. More importantly, it is also expensive to implement and maintain for carriers and does not provide adequate protection for devices in the early stage of the supply chain.
A Solution for the Future
It is evident that a viable and long-term solution needs to be devised across the industry to prevent mobile fraud and theft. Incorporating preventative measures at a hardware level allows carriers to embed remote lock and unlock technology into a device's secure hardware during the manufacturing process. This is most advantageous as it ensures that devices that are fraudulently obtained during the transit process are unable to be used and would therefore ensure that fraud is being eradicated at that stage. It also ensures that stolen devices cannot be reused or unlocked by an unauthorised party at any stage of the supply chain.
This technology enables the key players within the industry to find that fine line between being able to incorporate the lock and unlock technology and more customer-orientated experience for the consumer with increased levels of freedom.
This provides an enhanced level of protection at various stages to protect both the carriers and the end-users alike. Incorporating the lock and unlock technology into the manufacturing process prevents theft in the early stages of the manufacturing and supply chain and would mean that thieves would end up with a device which has no resale value ensuring that their attentions are turned elsewhere.
There would also be increased protection for end-users with widespread adoption, as there would be the opportunity for them to remotely lock their phone remotely in the event of it being lost or stolen, again leaving thieves with a handset that would not have the possibility of being resold.
As we move deeper into the world of the Internet of Things, there will be more challenges for the industry to face and overcome but widespread adoption of technology on this multi-layered basis would ensure that fraud in this area is eradicated and efforts focused elsewhere.
My name is Patrick Leahy, I am an Irish writer based in the UK. I am passionate about tech and have a strong interest in telecommunications, especially