In January, representatives from carrier, vendor and regulatory communities reconvened in London for Capacity’s second Wholesale Fraud Forum to confront the growing issue of fraud in the industry.
A year on from the first conference, many of the debates and discussions remained the same – chief of all, how can carriers work together more effectively to combat fraud?
Fraud has been an ongoing battle for wholesale due to its international nature, lack of jurisdiction and the unlikelihood of prosecuting fraudsters.
However, the increasing frequency and sophistication of fraudulent acts have prompted the wholesale industry into taking greater responsibility and helping support retail customers.
Over the last 12 months, a number of carriers have launched solutions designed to help operators detect fraud on their networks.
Tata Communications has launched a Fraud Protection Toolkit, equipped with real-time monitoring and data analytics, which quickly detects fraudulent patterns. Monitoring up to 30 million calls a day, the system identifies trends and risks and upon identifying a fraudulent call, blocks the number across the entire global network.
Over the last year, iBasis has been working on developing enhancements to its FraudAlert management system with plans to launch this year. Designed to detect suspicious traffic in near real-time, the cloud-based service is said to scan all traffic received from a customer, providing an early warning of possible revenue leaks caused by unsolicited traffic.
It also guards against unwanted SMS traffic – before it enters the network – and protects clients’ networks from unsolicited SMS traffic caused by spoofing, flooding, faking and spamming.
Such systems can be crucial in catching early signs of suspicious activity, says Jan Dingenouts, an independent telecoms consultant who has advised carriers such as Monaco Telecom and MTN International Carrier Services on fraud protection. “If the carrier’s traffic increases more than 50%, the alarm is raised. Within an hour, it will know where the strange traffic is coming from – that’s almost real-time,” he says.
Dingenouts believes such solutions are a sign of progress: “Being able to protect a retail operator against fraud with measures like that is a big step forward,” he says.
Another carrier which has placed fraud protection high on its agenda is BICS. Through a strategic partnership with cVidya in September 2013, it launched the FraudGuard platform; a detection and prevention system based on a crowd-sourcing model. The system is intended to drive shared experiences and insights across the BICS wholesale network.
The solution prevented several cases of fraud last year, according to Katia Gonzalez, head of fraud operations at BICS.
For example, BICS implemented the FraudGuard system for a customer in Africa to detect signs of international revenue share fraud. Gonzalez estimates that the platform saved the carrier as much as 40,000 euros a month.
To fight fraud effectively, carriers must move from a reactive fraud approach to a proactive fraud approach. “The big advantage of the system here is its proactivity. You can prevent fraud before you’re hit,” she says.
Dingenouts adds: “It’s a chicken and egg situation – there will always be fraud. You’ll find that once a defensive measure is taken, fraudsters will develop the next new thing. [Proactivity] needs to be high on the agenda.”
Changing attitudes towards fraud prevention
Another indication that momentum in tackling fraud is growing is increasing industry awareness. Changing attitudes towards fraud, Gonzales believes, have resulted in the deployment of increasingly sophisticated network monitoring solutions and the sharing of best practices through industry workgroups, such as Capacity’s wholesale fraud forum and the i3forum.
“About five years ago, carriers realised fraud was a growing problem, and decided to all come together and try to do something to help customers. We’ve come a long way since,” she says.
It isn’t just carriers that are taking the issue more seriously. BICS’ Gonzalez says vendors are becoming more interested in developing solutions to help carriers detect fraud.
Education will have a serious impact on wholesale carriers and retail operators. As fraudsters continue to find loopholes around the system, industry leaders are recognising the importance of sharing information surrounding risks and solutions to prevent fraudulent attacks. Educating customers should also be a continuing priority for carriers as retail operators need to know about the latest risks and best practices to prevent occurrences of fraudulent activities.
The year has seen carriers and retailers collaborate better on several fronts, Gonzalez observes: “What we are clearly seeing now is that cooperation has become much more of a reality. We are interacting more with retail customers, retailer suppliers and operators.”
In 2012, a recommendation on dispute handling and withholding payment was first laid out at the i3forum for carriers to support customers. Gonzalez says this process has since become “a little more extended in the community”.
“We are more successful in withholding payments in some cases. Ideally, we would like to be able to do it in more cases, in an easier way,” she adds.
The process of disputing payment is a laborious one – the average length of a dispute can take up to 10 months.
“From an administrative point of view, it’s a lot of work. You meet with your finance department, your commercial department and other various departments. Everybody has to work together,” she says.
Collaboration is key especially where revenues are concerned, notes Dingenouts.
“To carriers, retail customers are very important because they provide stable revenues and traffic stream. If there’s an issue of fraud with the retailer, the wholesale operator falls lower in the food chain. As a wholesale operator, you want to be as high as possible as that’s where you get the most revenues and margins,” he says.
Staying a step ahead
Carriers still have a great deal of work ahead in terms of implementing swift and decisive actions to counter fraud. Retailers need to inform carriers the moment they spot suspicious activity.
“As wholesalers, we need to pay suppliers in 30 days. Let’s say one of our customers’ experiences fraud and after 30 days, reports that fraud and contests the payment,” says Gonzalez.
“We then have a payment to honour with our supplier. Customers need to understand that in order for us to withhold payment, we need to know about the fraud before the payment is issued.”
Gonzalez is quick to add that the implementation of best practices is not yet homogenous in the industry. “Not everyone is applying the same principles. Payment terms are not equal around the world. We are moving ahead but we’re not there, just yet,” she adds.
Risk management is vital as costs in damages can rack up fast if fraud is not detected quickly.
“If fraudsters have no business case, they can’t connect more. We have to stop the business case for them,” says Dingenouts.
Dingenouts also wants carriers to take a firm stance on payments if fraud has taken place on their traffic.
“The larger carriers in the wholesale industry have to agree that if notice is given within 30 days of fraud being detected on their networks – no payment is needed [from the retail operators].”
BICS has already been implementing this over the past two years, says Gonzalez. “We organised it and now we are following clear processes. In the end, if you don’t pay the fraudster, he has no benefit in trying again. That is the fraudster’s punishment,” she says.
Removing the business case for fraud
Ending the business case for fraudsters is the answer to fraud prevention. “We have to make the business case impossible for fraudsters. They want traffic and revenue, but if the revenue is not arriving anymore, they will sell sweets – not minutes anymore,” says Dingenouts.
Ultimately, the gauntlet has been thrown to the larger Tier-1 carriers to lead the way.
“Carriers are the ones driving and facilitating the flow of revenue,” was the closing message at Capacity’s Wholesale Fraud Forum.
“We can’t look outside the room to solve the problem. The answer to fraud sits in this room.”
