Telecom fraud is widespread among communication service providers. The industry’s main regulatory frameworks are abused by scammers. It makes it difficult for telecom companies to identify, detect, and prevent potentially fraudulent activities.
What Is Telecommunications Fraud?
Telecom fraud is a type of scam that involves the misuse of hardware and services provided by telecom companies to hack user accounts or financial services. It may affect not only cloud-based PBX systems but also on-site infrastructure as well as smartphones in particular.
This fraud type usually involves service hacking and often leads to unpredictable costs for telecom companies. Thankfully, there are effective detection and preventive techniques that can prevent and reduce these risks.
Telecoms' Susceptibility to Payment Scams
Telecom companies are a prime place for fraud. To counter it, however, many ignore the chance to adopt cutting-edge anti-fraud solutions. It led to the 12% growth of telecommunications fraud in 2023. Due to the holes in the payment system caused by this antiquated method, there are many false declines and expensive overheads.
On the other hand, telecom fraud detection offers a big opportunity for the entire industry. These are some of the factors that make telcos susceptible to fraud:
- High transaction volume: Telcos process a lot of transactions every day. It might be challenging to keep an eye on every fraud attempt.
- Complex payment channels: It might be difficult to consistently avoid fraud across all channels when there are so many different payment alternatives available. They include online, mobile, and over-the-counter options.
- Lack of visibility: Telecom companies are frequently unable to track the full payment process clearly, which makes it difficult to identify and prevent fraudulent activity.
- Fraud sophistication: Scammers are always improving their strategies. They use sophisticated methods to take advantage of the system’s weak spots, such as SIM swapping, subscription fraud, and OTT bypass.
How Does Telecommunications Fraud Work?
While being among the most widely used technologies for transmitting data, telecom networks bring in a substantial amount of money worldwide. As a result, scammers have created sophisticated instruments and methods to profit from network exploitation.
Cyberattacks are evolving. It means telecom fraud is distinct and can be predicted. Since many operators still ignore sophisticated telecommunications fraud detection tools, companies are solely responsible for covering fraud costs.
Moreover, telecom firms try to reduce fraud by reselling products via local networks or carriers. Larger operators suffer more from secondary fraud because of extreme mobile network accessibility. This fact makes telecommunications fraud management more challenging.
Here are the two primary categories of telecom fraud that target both suppliers and clients:
- Provider frauds: hackers frequently gain access to the service provider's network and make unsanctioned calls to expensive places via voicemail systems or abandoned SIM cards.
- Customer Frauds: These specifically target customers. Fraudsters install covert systems that increase client bills, which are not discovered until it is too late by the service provider and the clients.
Telecom Fraud Types
Telecom fraud supposes various fraudulent techniques to take advantage of holes in communication systems. Fraudsters target communication networks, consumer accounts, and payment mechanisms.
Clients, financial service providers, and telcos are directly impacted financially by these measures, which resulted in an estimated loss of around $40 billion in 2021.
This number will continue to rise with lacking efficient technology and prompt action, endangering sales and client loyalty. Building effective fraud prevention methods requires an understanding of particular fraud types and patterns.
Let's examine several important categories of telecom fraud.
International RevShare Fraud
Fraudsters exploit hacked phones, stolen SIM cards, and compromised PBXs to direct calls to their lines or leased lines with high incoming fees.
The unsuspecting business ends up with hefty phone bills for non-existing calls, only realizing they’ve been scammed when it’s time to pay.
Another method involves making a short call, prompting a user to call back to a premium number.
Additionally, the user’s network also has to cover fees related to the international carrier. Otherwise, the traffic won’t be directed to the destination network.
Wangiri Fraud
Also known as "one and cut" in Japanese, Wangiri fraud involves making a brief call to a victim. In simpler words, fraudsters create a single call and then hang up. They aim to bait a target user into calling back. It may lead to resulting larder fees directed to scammers.
Fraudsters may also use the SMS scenario, where a user gets a message urging him or her to call back for false reasons. A red flag for this type of fraud is a surge in calls to high-cost numbers. Providers should these sources within their internal ecosystem or as a part of a telecommunications fraud detection strategy.
Interconnect Bypassing
In this scheme, criminals exploit the fee difference between high international interconnect rates and lower retail rates.
As voice traffic moves from origin to destination through multiple carriers, each pays fees for routing the traffic. Fraudsters manipulate these routes to profit from the rate disparities, taking advantage of low-cost termination fees.
Telecom Arbitrage Fraud
Arbitrage involves taking advantage of fee differences, particularly in rates for long-distance calls between countries. Just as the interconnect bypasses fraud, it can reduce international call costs for users.
On the other hand, fraudsters get a chance to squeeze between operators. They falsely route calls through cheaper countries while claiming long-distance connections.
PBX Hacking
Criminals search the internet for vulnerabilities in a company’s PBX system. Once they gain access, they make international calls, charging the unsuspecting PBX owner. These attacks often occur at night or on weekends, allowing fraudsters to generate illegal revenue while connected.
Traffic Pumping
Due to regulations, long-distance carriers pay access fees to local carriers for calls to their subscribers. Rural carriers charge higher fees than urban ones.
To boost revenue, some rural carriers partner with service providers to route calls through them, often involving high-call volume services like phone sex or conference calls. Internationally, fraudsters set up conference servers in developing countries, partnering with local telecom companies. Authorities can intervene if a carrier’s traffic increases significantly, requiring them to re-file their access tariff.
Deposit Fraud
Credit card fraud targets telecom companies that host e-commerce projects or have digital shops. Fraudsters use stolen credit card numbers to buy prepaid SIMs and or hardware, creating their mobile networks for a bigger number of attacks.
Scammers generate and take control over IP addresses to commit other types of telecom fraud.
Subscription Abuse
Fraudsters steal credentials or create false IDs to hack mobile devices for paid subscriptions without intending to pay. They easily acquire fake identities or buy stolen ones from the dark web.
Hackers get high-end smartphones through contracts with minimal upfront costs, then resell them for profit. Meanwhile, all calls made are charged to the network.
Account Takeover Fraud
In an account takeover (ATO), criminals steal information to gain control of a victim’s account. Mobile subscribers are vulnerable because many platforms use one-time PINs sent via text or call for authentication.
Fraudsters intercept these PINs to access accounts. This type of ATO, known as SIM swapping, allows them to send and receive calls and texts as the customer, bypassing multi-factor authentication and accessing other accounts.
SMS Phishing
Phishing involves using fake email messages to gather personal information for identity theft. In telecom, this is known as Vishing (Voice-Phishing), where scammers pose as legitimate businesses to extract information over the phone. This information is then used for identity theft or other frauds.
SIM Swapping and Jacking
Scammers use specific tools to migrate users’ phone numbers to fraudulent SIMs. It gives them a chance to track and manage victim’s calls and SMS.
With companies using OTPs for 2FA via text or call, hackers use stolen numbers to intercept these verifications. They contact the telecom’s customer service, requesting a number transfer.
After the phone number is transferred, they get all verifications letting them control user accounts in either social media or fintech apps.
Customer's Role in Prevention and Detection
Telecom fraud can be minimized by enforcing a comprehensive strategy. Providers have alert systems for violations, but customers must also stay vigilant about their devices' security and services to prevent threats.
Avoid Unknown Callers
Users should ignore unsolicited calls. It's best to be cautious with unfamiliar numbers. It is sometimes safer just to let some calls go to the voicemail. Fraudsters can spoof caller IDs, so avoid engaging with unknown callers that are hard or impossible to verify.
If a caller still tries to find out details about your banking account, a family member, or utilities, it is better to hang up. If you want to contact any service, simply look it up in the official listing instead of using numbers provided by potential fraudsters.
If the caller claims to represent a company you deal with, check-up with the number on a billing statement.
Track Usage and Charges
Know your expenses and monitor your monthly spending to spot fraud. For example, if someone claims to be from your utility company and demands immediate payment, knowing your typical bills can help you identify the scam.
Many people don't track their expenses, but it’s crucial. Genuine companies rarely demand immediate payments. Most creditors will work with you to set up payment plans or give you more time. If someone insists on immediate payment, they’re likely not legitimate.
Keep Personal Data Safe
Never share sensitive information with unknown callers. Ask for the caller’s identity, number, and how they got your information.
If someone asks to provide personal data and claims to be from your company, it seems like fraudsters are seeking your details for a further scam.
Once they have your information, other scammers might target you. Never transfer money to unknown callers or organizations; such transactions are hard to trace, and banks have little recourse once the money is gone.
Rely on Industry Registries
Scammers exploit remote work culture by pretending to be managers and asking employees to buy gift cards. Once the employee sends the card numbers, the money vanishes. Other scams involve offering loans or credit cards for an advance fee, which is illegal. Selling lottery tickets by phone or mail is also prohibited.
Signing up for the Do Not Call Registry helps reduce telemarketing calls. Most telemarketers who contact you after you join the registry are likely scammers.
Emerging Telecom Fraud Trends
Telecom fraud evolves all the time bringing new techniques and patterns to life. The most recent trends show more advanced fraudulent approaches:
- Virtual SIM Cards (eSIMs): Though eSIMs have become harder to clone, they are still used for social engineering.
- Social Engineering: The global landscape has been transforming due to pandemics and geopolitical events. It gave fraudsters new opportunities for SMS and call-based attacks. Besides, the evolution of deepfake technology lets hackers target more user categories.
- Combined Attacks: Hackers form groups and collaborations to establish a more intense fraudulent approach. They combine different patterns like SIM swapping with identity thefts or fake credentials falsely representing telecom staff.
- Synthetic IDs: Fraudsters use advanced methods to get docks and ID details through phishing or renting services. Tracking these synthetic IDs is harder as they often contain real insights.
These trends reveal the evolving nature of telecom fraud, emphasizing the need for continuous improvement in risk assessment powered by advanced anti-fraud solutions.
The Bottom Line
JuicyScore is here to deliver state-of-the-art telecommunications fraud prevention tools. In telecom fraud detection, this means using seamless, invisible solutions to collect data without disrupting the customer experience.
Businesses may benefit from smoother operations and lower fraudulent activity rates involving account takeover, transaction fraud, ID fraud, and more. Contact us for more information or book a test drive.
FAQs
What Is Subscription Fraud in Telecom?
This type of telecom fraud happens when hackers get remoter access to a user’s phone. The main mission is to register and get a paid subscription. The main issue here is that fraudsters are not going to pay for that. Instead, a victim will be charged automatically.
How Can We Prevent Telecommunication Fraud?
Different anti-fraud means need to be incorporated. While telecom fraud considers different types of scams, a comprehensive solution is needed to detect and prevent auctions like social engineering, account takeover, synthetic IDs, and more.
What Is Fraud Over the Telephone Called?
A fraudster can make a quick phone call trying to get sensitive data from a victim. Another scenario involves pretending a banking or business staff to make a target user pay or even call back. This is how scammers try to benefit from extra fees for premium numbers.
What Can You Do If You Get Scammed by A Phone?
First of all, you need to contact your bank and block access to a stolen or compromised credit card. Secondly, you can claim a refund from the telecom operator. This way of getting a moneyback is also known as a chargeback scheme.
What Is an Example of a Telephone Scam?
Imagine someone calling you and asking to provide credit card details for filling in the application on your behalf. Generally, this is how fraudsters try to persuade victims to give them then needed credentials for further fraud.