Transcript Types of Fraud and F..

FMRANS 2015
21 - 23 October 2015, Harare, Zimbabwe
Types of Fraud and FMS
Implementation
Jacob Munodawafa
Executive Secretary and CEO
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Telecommunications Fraud
Telecommunications fraud is a problem that
affects all operators and service providers
and is an important factor in their annual
revenue losses.
Aside from financial impact, it also
constrains new service deployment and may
contribute to adverse costumer perception
and, consequently, churn increase.
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Stakeholder Expectations
Stakeholders in today’s competitive market, shareholders
are placing great pressure on telecommunication operators
to obtain larger profits, increase efficiency and
simultaneously reduce costs.
For operators that have reached the mature phase of their
business cycle, the possibility of increasing profits by raising
market share is increasingly difficult and minimising losses
is one of the opportunities to increase revenue
An important factor that should always be identified as a
source of revenue loss is fraud and operator need to pay
more attention to it
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Estimated Fraud Losses
Several international organizations have
estimated that fraud may affect between 3%
and 6% of an operator’s gross revenue
Having an efficient fraud management system
may help reduce those values by contributing
directly to the detection and resulting reduction
of bad debt and fraudulent service usage.
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Estimated Fraud Losses (cont)
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3 M’s fraud classification
Fraud in telecommunications can be very complex and
transversal to the operator structure
Method
Means
Motive
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Motive
It is the fundamental objective of the fraud
Non-revenue fraud, making use of a service
with intent to avoid the cost but without the
intention of making money. It includes providing
no-cost services to friends or private usage
Revenue fraud, which intends financial benefits
as in sim boxes, Call Selling or Premium Rate
Service (PRS) fraud
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Means
It is the nature or form of the fraud used to satisfy the
motive
Call Selling: sale of high tariff calls – usually international – bellow
their market value with the intent to evade the operator payment.
Premium Rate Services (PRS) Fraud: inflation of the revenue
payable to a Service Provider by generating calls to a PRS line.
Surfing: use of other person’s service without consent which can
be achieved, for example, through SIM card duplication (cloning),
illegally obtaining calling card authorisation details or PBX hacking.
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Means (cont)
It is the nature or form of the fraud used to satisfy the
motive
Ghosting: refers to obtaining free or cheap rate through technical means of
deceiving the network. It can be performed, for example, by manipulating
switch or database contents to ‘alter’ call records.
Sensitive information disclosure - involves obtaining valuable information
(e.g. VIP client details or access codes) and selling it to external entities.
This fraud is usually performed internally.
Content stealing: a more recent type of fraud, which deals with getting
high value contents (videos, ring tones, games) for free, by exploiting the
non real-time pre-paid billing pre-paid system (hot-billing) or by avoiding
payment of the invoice (post-paid services).
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Method
It is the generic fraud method.
Subscription: fraudulent subscription obtained with false credentials
that allow debt accumulation by systematic payment avoidance.
Technical: more advanced fraud that is based in exploiting loopholes
found in the operator network elements or platforms.
Internal: inside information systems abuse
Point of Sale: when the dealer manipulates sales figures to increase
the compensations paid by the operator
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Types of Fraud
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Gateways for Fraud
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FRAUD MANAGEMENT SYSTEMS
FMS should be able to collect data from multiple formats
and sources, and through a process of data preparation
and mediation, conveniently process and adapt it to the
system internal data formats.
Some of the relevant processes of this stage are data
filtering, call assembly and call rating. With some FMS
tools, it is possible to perform data enhancement through
cross-relation of different data sources, which may boost
performance in some more complex detection techniques
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FRAUD MANAGEMENT SYSTEMS
FMS should be able to collect data from multiple formats
and sources, and through a process of data preparation
and mediation, conveniently process and adapt it to the
system internal data formats.
Some of the relevant processes of this stage are data
filtering, call assembly and call rating. With some FMS
tools, it is possible to perform data enhancement through
cross-relation of different data sources, which may boost
performance in some more complex detection techniques
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Generic FMS Architecture
Usage Data
Customer Data
Other Sources
Unified Data
Detection
Analysis
Case Management
Reporting
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FMS Alerts and Reports
FMS must provide friendly and complete reporting
tools, thus allowing access to all relevant
information to analyst, fraud process manager and
system management information.
Fraud tackling efficiency may also benefit from
seamlessly integrating and cross-referencing
multiple data sources client and billing
information), which may enable focusing on most
suspicious alerts
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FMS Alerts and Reports
FMS must provide friendly and complete reporting
tools, thus allowing access to all relevant
information to analyst, fraud process manager and
system management information.
Fraud tackling efficiency may also benefit from
seamlessly integrating and cross-referencing
multiple data sources client and billing
information), which may enable focusing on most
suspicious alerts
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Way Forward
The impact of fraud in operator revenue justifies the
introduction and consolidation of fraud detection processes
performed by highly experienced fraud analysts.
These experts should be permanently aware of current fraud
types and methods, and how to implement the appropriate
detection techniques.
It is crucial to permanently adapt current FMS detection
techniques (e.g. adapt rules and thresholds or train neural
networks and decision trees with new fraud behaviours) and
introduce new ones more capable of stopping emerging
fraud types, enabling an increased efficiency in the
detection processes
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References
1. Bill Seymour, “How Neural Network Technology Can Tackle the Growing
Telecom Fraud Problem”, Information Security Bulletin, CHI Publishing Ltd,
April 2000
2. E. G. Berbés, I. C. Múgica and F. J. G. Mazario, “Gestión del fraude en
telecomunicaciones”, Comunicaciones de Telefónica I+D, Numero 33,
Marzo 2004.
3. Michael Cahill, Fei Chen, Diane Lambert, José Pinheiro and Don X. Sun,
“Detecting Fraud in the Real World”, Handbook of Massive Datasets,
Kluewer, 2002.
4. Helder Biscaia, Spiros Alexiou, Fernando Pavón and Rolf Hulthén, “Do
intelligent techniques aid fraud detection?”, Eurescom Project Reports,
March 2002.
5. Tom Fawcett and Foster Provost, “Combining Data Mining and Machine
Learning for Effective User Profiling”, Second International Conference on
Knowledge Discovery and Data Mining, August 1996.
6. Luis Cortesão, Filipe Martins, António Rosa and Pedro Carvalho “Fraud
Management Systems in Telecommunications: a practical approach”
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2. WINNING TEAM
 Highly organised fraudsters are actually
running their own business and have their
own “customers”
 Fraudsters are the winning team but a little
fight with them may save a fortune although
not all.
 Operators need to continually consider the
fraud risk as it is not a single event, but
something that must be continuously
assessed as the business evolves
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3. HOW MUCH PER YEAR?
Through industry bodies such as the
GSM Fraud Forum and CFCA, ICTs
industry reports fraud losses in the
range of 109 to 1012 dollars globally
although no accurate industry figures
are disclosed due to commercial
sensitivity.
Telecoms fraud has exponentially
increased over the years and continues
to rise.
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4. TYPES OF FRAUD
Subscription Fraud
Internal Fraud
Technical Fraud
Prepaid Fraud
VAS Fraud
Social Engineering
Roaming Fraud
Premium Rate Fraud
International Dial Fraud
Payment Fraud
PBX Fraud
3rd Party Fraud
Financial Fraud
Dealer Fraud
SMS/MMS Fraud
Voicemail Fraud
Call Forwarding/Diversion Fraud
Theft of SIMs/Handsets/Cards
SIM Cloning
Bypass/SIM Boxing
International Revenue Share Fraud
Interconnect Fraud
E & MCommerce Fraud
Modem Hijacking
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5. TARGET & FRAUD TYPE
Fraudsters predominantly target the the
easy target.
They look for operational weaknesses of
the organization by performing their own
assessment of the business culture.
Highly organized fraudsters do not
always perform one type of fraud at a
time but maximize by combining various
types in one time e.g. roaming fraud with
international revenue share fraud, etc
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6. FRAUD MANAGEMENT
STRATEGY
Fraud may result from failure of
technology used to deliver the services,
or that employed to combat it or from
the organization refraining from taking
action.
There is no single solution to the fraud
management.
Fraud Strategy ensures appropriate mix
of people, processes and tools are in
place, supported the management.
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7. FRAUD MANAGEMENT
Effective fraud management is not only
about detecting and preventing fraud,
it’s also about being able to sell,
educate, report and promote the
requirement for it throughout the
business line.
There is need for the organizations to
have Fraud Management Systems
(FMs)
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8. ADVANTAGES OF FMS
Automation: The extraction and
processing of the relevant events is
performed with little or no human
intervention.
Volume and Quality of Data: Large
Flexibility
Quick Return on Investment
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Way Forward
The battle against fraudsters will
never be won due to the fast moving
telecoms environment and the drive
to launch more complex products
and services quickly to attract
market share and maintain a
competitive advantage.
A war without end!!!
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