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Identity fraud in Telecommunication


​​​What is identity fraud in telecom?

According to the Communications Fraud​​ Control Association (CFCA), identity fraud in telecommunication during the su​bscription process is one of the most common telecommunication frauds. Such telecom frauds involve identity theft or the use of fabricated identities at point of sale, enabling either the fraudulent use of telecom services, or the use of such services for subsequent fraudulent activities.

Indeed, as the services offered by MNOs flourish, so does the potential for subscription fraud. Once a fake subscription is established, the fraudster then has access to a wide range of value-added services including not just call-related, TV and internet, but also new mobile financial services such as, mobile banking and mobile payment.

CFOs and heads of fraud departments for the major MNOs are faced with a big challenge to secure the many channels fraudsters can target.

According to risk management and analytics expert Neural Technologies, there are over 200 types of telecommunication fraud, related to identity theft or fabrication.

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Ho​w does identity fraud in telecom happen?

During the consumer acquisition stage in the MNO's store, consumers must usually provide ID documents along with utility bills and bank account details. Identity verification service is key to the subscription process and is usually carried out manually by a sales assistant. However, manual checks are ineffective and a waste of resources. The failure to detect forged or stolen IDs at this point in the onboarding process means fraudsters are able to walk out of stores with high-end, heavily subsidized smartphones, and it may take some time before the fraud is discovered.

So-called SIM-swap fraud is another major problem, whereby scammers use fake IDs to gain access to a legitimate subscriber's SIM card. They then use this SIM to authenticate transactions with the real subscriber's bank, making online purchases, money transfers, and running up huge costs in the legitimate subscriber's name

Manual and non-automated identity verification service is clearly ineffective and exposes to a major risk of telecommunication fraud. 

Why is strong identity verification service critical for MNOs?​

​What is identity fraud? Effective identity verification service is key to tackling telecom fraud. Indeed, the Technology Research Institute (TRI) has stated that, real-time point-of-sale identity verification services are an invaluable aid to stopping fraudsters from exploiting identity theft."

The challenge to MNOs is threefold. They need to ensure they are compliant with local and international regulations; their CFOs and Revenue Assurance departments need to reduce the heavy financial burden of fraud, and they must protect their brand image to maintain their reputation as operators one can trust.


Compliance with regulations

Public authorities and governments are requesting ever-stronger identity verification services. For instance, more than 90 countries now require proper registration with strict identity verification service for the purchase of prepaid SIM cards to tackle national security issues and criminal behavior, following recommendations from the GSMA. Compliance is critical for MNOs, especially as prepaid SIM cards represent 47% of the global SIM card market (figures from GSMA for Q4, 2015).

Moreover, mobile financial services are playing an increasingly important role in the service offer from MNO's portfolios, and as such, they must meet so-called Know Your Customer (KYC) ID verification procedures. Non-compliance with such procedures can lead to fines and disablement of SIM cards and services.

Compliance with Regulations

​​​The financial burden of telecom fraud

Telecommunication fraud resulting from insufficient ID verification procedures can take months to be discovered. As a result, MNOs are subject to considerable financial cost, both direct, with the loss of a heavily subsidized handset, and indirect, through all the services an MNO offers through a single subscription such as foreign calls, internet, TV, and mobile financial services.

Neural Technologies estimates the annual cost of identity fraud to the telecoms industry at €40 billion. And according to the 2015 Global CFCA Telecom Fraud Survey 2015, subscription or identity fraud represents 35% of all fraud undergone by the telecoms industry. Furthermore, Neural Technologies claims this can represent up to 10% of a MNO's bottom line.

Costs of damaged brand image

In addition, the indirect costs associated with identity theft can mount up quickly. MNOs need to act fast to address the damage caused to their reputation as a result of poor user experiences. This includes compensation and incentive payments, updating of security parameters in back-end systems, and reissuance of SIM cards, not to mention any financial liability issues with banks. Furthermore, long and costly advertising campaigns to restore trust with consumers, investors, partners play a big part in these costs. 

Gemalto in the field of identity verification service

Gemalto is the leading supplier of secure ID documents for governments, according to ABI Research 2014 and 2015 studies. We work closely with identity fraud experts around the world, and through the many ID projects we have rolled out, including the securing of national borders for many countries, have built up a raft of experience in the detection of fake documents.

Identity fraud techniques are evolving constantly and it is vital to stay ahead of the game. Gemalto closely monitors any shifts in technique and immediately integrates them in our portfolio of identity verification services. Our solutions perform specific and automated cutting-edge graphical and biometric checks on all types of ID documents in a matter of seconds, freeing up our customers to focus on the customer experience.

We combine our in-depth knowledge of both public and private sectors to help MNOs slash subscription fraud with identity verification services that meet government-grade security standards, comply with national regulations and easily integrate into their existing environment.

Find out more about how Gemalto solutions help MNOs slash identity fraud