Business Issues
Communications Fraud
Understanding Fraud problems and solutions in the
Telecommunications, Media and Entertainment sectors
Fraud in the Telecommunications, Media and
Entertainment sectors can have a massive impact
on an organisation’s operations and image. Fraud
problems often lead to dramatically increased
costs, artificially inflated revenue data, damage to
the brand and customer dissatisfaction. Fraud in
the sector has been relatively high profile for the
last 15 years with notorious cases leading to new
laws and increased Regulator attention. Most
Service Providers, Regulators and Governments
are now taking fraud very seriously - it is costing
the world economy billions of dollars each year
and degrading the quality of genuine service
offerings.
The sector provides very attractive targets for
fraudsters due to the multitude of products and the
relative ease at which they can transform these
services into cash through fraud. It’s estimated
that the telecoms industry alone is losing $72-80
billion annually (source Communications Fraud
Control Association: CFCA Global Fraud Loss
Survey 2009).
There are several prime fraud objectives:
 Making money
 Saving money/avoiding cost
 Money laundering
 Anonymity (often facilitating other crimes)
Given the global nature of the risk, and the fact
that fraud is sometimes used to facilitate or
sponsor more serious crimes (for example
terrorism and money laundering), organisations
that neglect to aggressively combat fraud not only
face direct financial and operational impact but
may also be seen to be diminished in their
Corporate Social Responsibility and Global
Citizenship status by endangering the community
at large.
Business Assurance | Revenue Assurance | Fraud Management | Receivables Management
It’s widely recognised that reaching a zero-fraud
state is almost impossible and may not be cost
effective, however managing fraud and
establishing a company’s tolerance to risk is
essential to keeping losses in check. Furthermore,
enhanced fraud prevention practices can become
a competitive advantage allowing Service
Providers to confidently launch new services with
higher profitability quickly to market.
The Issues
Fraud directly impacts the bottom line; revenues
generated by fraudulent activities are artificial and
will often not be collected (except, of course, when
legitimate customers have their services
compromised and unwittingly pay the fraud
charges). In the majority of cases, the revenues
would not have been generated in the first place if
the fraud had not taken place. In fact, some fraud
operations actually compete with genuine services
and divert legitimate revenues to a black-hole.
Preventing fraud may actually increase legitimate
revenues as a ‘competitor’ is taken out.
It’s important to remember that fraud losses are
not limited to uncollected revenue; they include
interconnect costs, 3rd party and content costs,
sales commissions paid to dealers and staff,
handling costs of customers who are the victims of
fraud, lost handset or equipment costs, cost of the
resources to resolve issues/restore services etc.
An organisation will need to have an in-depth
understanding of what its net cost of fraud is in
order to allocate time and resources to resolving
the issues. Fraud can also create serious security
issues, threats to staff, blackmail, loss of sensitive
data, negative impact on employee morale and
damage to the brand through various means.
So how does fraud happen? Fraudsters will
usually commit fraud where it is the easiest and
most cost effective for them to do so; they will take
 Business Issues
Communications Fraud
Understanding Fraud problems and solutions in the
Telecommunications, Media and Entertainment sectors
advantage of weaknesses or design flaws in
products and services, technical and operational
infrastructure, processes, security, people and
also target legal loopholes in contracts, e.g.
arbitrage opportunities in tariffs etc. Fraudsters will
use social engineering techniques, infiltration,
theft, extortion, technical attacks, identity theft or
simply provide incorrect information to avoid
controls in place. Once organised fraudsters have
access to services, data or equipment they will
often use this to generate the maximum revenue
for themselves as fast as possible (e.g. through
service re-sale) and for as long as possible. The
fraudsters generally have a very good
understanding of a Service Providers processes,
policies and controls and will use this knowledge
to their benefit, maybe skirting credit limits or Fair
Use Policy thresholds.
So how do you know if you have a problem? The
majority Service Providers have already
implemented fraud controls to some extent but in
many cases these controls are not sufficient.
Unless an organisation has taken a proactive and
holistic approach to fraud prevention and
management then it’s very likely that it has, or will
soon have, a serious fraud issue. Because fraud is
a company-wide problem, indicators of fraudulent
activity can be found in many areas of an
organisation, e.g. a high-level of complaints to
customer services, inconsistencies in stock levels,
high usage of specific products, evidence of
compromised security, increasing bad debt,
chargebacks and many more. In isolation these
indicators may not trigger suspicion. Therefore to
detect and measure the level of fraud loss/
exposure it is necessary to gather and analyse
data from multiple sources.
Business Assurance | Revenue Assurance | Fraud Management | Receivables Management
Managing the problem
There are a multitude of vendors selling more and
more sophisticated software and tools for fraud
detection. These tools, combined with effective
investigation and response to fraudulent attacks,
and proactive fraud prevention techniques, are a
good start. However, to really manage fraud
successfully a well-planned and executed fraud
management strategy is essential. This strategy
will need to cover all the aspects of the
organisations’ value chain, processes, systems
and people.
That being said, it is
important to justify the
spend against the
benefits and staged
deployment of a
strategy is often a
good way to proceed,
justifying next-stage
investment as your
strategy takes shape
in deployment. In
effect, each stage
sponsors the next through success measures and
returns. Execution of a carefully considered plan
should net excellent results and genuinely bring
about enhanced profitability.
Please refer to the Services, Solutions and
Packages pages of our web-site for a more
detailed perspective of the components that might
be deployed within a strategic plan. Alternatively,
Contact Us to discuss your precise needs.