Identity theft, a popular catch phrase in the financial services industry, is also the leading type of fraud afflicting the telecommunications industry, according to a new survey by the Telecommunications Risk Management Association.
The TRMA’s findings bolster last year’s estimate from the Communications Fraud Control Association that annual worldwide telecom fraud losses are in the range of $35 billion to $40 billion per year.
The TRMA surveyed its members-which include Alltel Corp., Nextel Communications Inc., Rogers AT&T Wireless, T-Mobile USA Inc. and Western Wireless Corp., among others-as part of a new campaign to identify and deploy best practices to combat fraud through open collaboration, information sharing and education among major carriers.
According to the TRMA study, telecom carriers increasingly are challenged by sophisticated fraudsters using the Internet to create new schemes. “Fraudsters are creative criminals. For them, the Internet is a new frontier,” explained Betty Plocharczyk, chairwoman of TRMA’s fraud management committee. “It’s a virtual goldmine of personal information that fraudsters can easily access and then use to create false identities … they can use it to obtain all kinds of products and services.”
Carriers are anxious to combat the growing instances of fraud. In fact, two-thirds of carriers already are using technology solutions, including fraudster databases, personal verification and prepaid systems, to combat fraud, according to TRMA’s survey.
Fair Isaac Corp.’s Fraud Analytics division is one source offering industrywide solutions to combat growing instances of fraud. Among its telecom customers, Fair Isaac counts Alltel, Sprint PCS, Telstra, Cable & Wireless, and Verizon Wireless. The group works with telecom operators behind the scenes to protect them from fraudsters, in turn protecting consumers, explained Tony Zarella, director of risk management at Fair Isaac. “You [the consumer] might know about us, but more often than not you don’t,” said Zarella.
Fair Isaac Fraud Analytics is primarily dedicated to reducing fraud. The group also offers risk management, attrition management and profitability solutions.
The company’s solutions are capable of detecting technological fraud, like hacking and cloning of information, as well as subscription fraud, otherwise known as identity theft. Other recent trends in fraud in the telecom industry that Fair Isaac works to detect include network or equipment hacking, agent or reseller fraud, Internet exchange of fraud information, switch manipulation, and insider fraud and collusion. Fraudsters use these techniques to steal identities, access high-speed wireless LAN networks, access 2.5G and 3G services, and to steal content or devices.
According to Zarella, the group is focused on catching as much fraud as possible, as quickly and efficiently as possible. To that end, Fair Isaac solutions detect instances of fraud and then record them in a data consortium. That data is applied to all Fair Isaac customers, allowing them to more quickly and accurately recognize global fraud or bad debt across the industry. The group claims its solutions reduce loss by up to 50 percent with the initial deployment just by detecting fraud and risk.
Going forward, the likely consolidation of wireless players, the convergence of telecom services, and the global spread of wireless service will present new challenges.
