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Combatting COVID Fraud Risks

By: Stu Bradley, Sundeep Tengur

The telecommunications industry, much like its banking and financial services counterparts, is amid a period of turmoil. The impacts of the novel coronavirus have led to an economic downturn, which experts anticipate will have greater impacts than 2008’s financial crisis. Arson attacks on 5G masts have grabbed headlines, but less visible fraud attacks on communications service providers (CSPs) have potential for more significant long-term damage.

Airtime abuse, subscription fraud, and other schemes cost CSPs an estimated $28.3 billion worldwide in 2019, according to the Communications Fraud Control Association. Fraud losses directly impact bottom lines such that CSPs can no longer sustain nor absorb these losses as a cost of doing business. It’s past time for industry leaders to gain an edge on this growing problem, now exacerbated by the pandemic.

Enemies at the door

The telecommunications industry has always had to contend with opportunistic fraud—and with much of the economy on hold, organized fraud rings are intensifying their assaults. Fraud ring leaders understand the industry’s current detection strategies remain mostly reactive. They devise modes to circumvent existing fraud barriers and slip through the cracks with relative ease. Among their favored strategies, fraudsters extensively use stolen or fabricated identities to access valuable smartphones and services. They also employ “mules”—typically individuals lured by easy cash—to visit stores and obtain as many post-paid smartphones as possible.

Facing criminals’ increased velocity and sophistication, CSPs have no choice but to move their fraud prevention mechanisms upstream. The traditional find-a-needle-in-a-haystack detection approach has proven too complex, time-consuming and costly. It’s far better to keep the bad actors off the books from the outset.

According to the Technology Research Institute, “Real-time point-of-sale identity verification services are invaluable to stopping fraudsters from exploiting identity theft." CSPs can gain an edge over their attackers by using a combination of entity resolution, peer group profiling, and risk scoring on both internal and third-party data (e.g., credit bureau, device profiling, geolocation, and other data).

Identity is the new gold

Data privacy and identity authentication will be a key priority for CSPs in their ongoing fight against fraud. COVID-19 has pushed many consumers and businesses online, and a large and growing number rely on telecommunication services to transact. But even as they embrace new means for transacting, many fear the unauthorized use of their data and the financial losses that may result—and for good reason.

At least 7.9 billion highly sensitive, personal records were exposed through data breaches in 2019 alone. The commoditization of this data on the dark web makes it easier than ever for nefarious individuals and crime rings to steal identities—and even concoct convincing fake ones.

The industry must prioritize the ability to authenticate and verify digital identity in a frictionless, non-intrusive manner. These capabilities will not only help reduce account takeover scams like SIM swaps, but they also boost the customer experience—a critical differentiator in a competitive market.

Revamped governance

Navigating work-from-home orders and social distancing measures, many CSPs are doing business outside their typical operational framework. For example, while most organizations have on-premise solutions for fraud management, investigations and analysis, investigators working from home may not have optimal access to the data and systems. Such factors can increase fraud losses.

Many mobile network operators (MNOs) recognize such losses are no longer sustainable, particularly when added to costs associated with local and international regulatory compliance and ongoing efforts around brand reputation preservation. It is therefore essential that CSPs appoint dedicated leaders accountable for a robust fraud strategy. These leaders should ideally have a direct reporting line to the C-level to ensure that fraud is factored into the company’s business continuity plan during and after the pandemic. 

Telecom operators must also understand they cannot win this fight alone. Customer awareness is critical to fighting fraud schemes. Similar to hand hygiene and social distancing guidelines enacted to curb the spread of COVID-19, CSPs must educate their customers to recognize the often subtle signs of fraud— particularly now as schemers are using COVID scams to lure unsuspecting victims into their traps.

Optimize and automate

The current state of play forces businesses to adapt to pandemic-driven change. Priorities must be redefined and resources reallocated to high-risk and mission-critical tasks. Operational workstreams must likewise evolve to reflect the new “normal.” For



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