The Changing Nature of Fraud

According to a recent global fraud study by the Communications Fraud Control Association (CFCA), fraud in all its forms cost the telecommunications industry more than $29 billion globally last year. Here, Jason Lane-Sellers, director of fraud and identity management at LexisNexis Risk Solutions and President at CFCA, talks to Ian Hunter and looks at the wider picture.

By other estimates, fraud could consume between 3% and 10% of operators’ bottom lines—pushing potential losses even higher. Either way, digital channels are quickly becoming the avenue of attack behind a growing share of those losses.

As ever in this business the criminals are getting smarter. Cybercriminals are becoming more and more indecipherable from customers through credentials-enabled impersonation, with subscription and account takeover fraud now accounting for more than $12 billion in annual losses.

Comms Business Magazine (CBM): Is the Fraud problem getting bigger in the telecoms sector and what are the latest attack methods?

Jason Lane-Sellers (JLS): Fraud is evolving in the telecoms sector, moving away from what we’ve traditionally seen, which focused on pure telecoms services, such as international dialling abuse, to an attack which is more focused on the identity of the consumer. There are now multiple facets, including elements of financial fraud, e-commerce fraud, retail, logistics, social engineering, etc. With an increase in identity theft, attacks like account takeovers are on the rise. Through the theft of credentials to access existing customers’ accounts, fraudsters can then comprise both customers’ telecoms services and personal financial services that use the telecom account for verification. This can also result in the interception of a purchase of a brand new device from the telco or the fraudulent use of credentials for app purchases.

While not all these issues show immediate financial impacts for the telecommunications industry, they do impact the relationship with the customer and the brand of the telco, resulting in a reputational hit. This can decrease the revenue from new customers taking on services or result in old customers switching providers.

CBM: Are you seeing an effective response from telcos and communications service providers to stem the tide? What are the challenges they face?

JLS: Currently, telcos are starting to realise the scale of the change that is occurring and are suffering losses as they try and adapt. It is now clear that the previous focus on fighting network and physical retail fraud reactively needs to change, as this approach cannot cope with the scale and advancements now being adopted by fraudsters.

The industry now needs to become ‘real time’ and understand the online journeys of their customers, in order to identify trusted customers as opposed to fraudulent ones. This can be done by constantly and anonymously monitoring transactions. Then, telcos are able to spot when a certain behaviour may be fraudulent or a customer is being coerced into doing something irregular. Fraud departments also need to be able to understand the omnichannel customer, where customers can interact both online and physically, all within the lifecycle of a transaction, such as in the case of ‘click & collect’. However, this must be done in a way which does not raise barriers for the customer. The experience should be as seamless as possible.

CBM: What more could suppliers do? If there was just one recommendation from CFCA, what would it be?

JLS: Telcos need real time, unobtrusive omnichannel fraud risk management. There should be limited friction in the consumer process, while still allowing management of the full remit of consumer risks. This comes at a time when telco fraud teams now have to not only protect the organisation from fraud, but prevent consumers from being impacted whilst utilizing their services

Ed Says…

Traditional telecoms fraud has been focused around the utilisation of services provided by the telco such as voice. Voice services used to be the focus of fraud attacks to gain international dialling access or propagate revenue from voice revenue share services.

However, with the reduced cost of international calls and the growth of IP based calling options and smartphone technology the financial value of fraud has started to move towards both the consumer and mobile/ wireless environments.

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David Dungay

Editor - Comms Business Magazine