Fraud watch

Warnings from Etisalat and QTel about the growing threat to customers from scams suggest that telecoms related fraud is on the increase.

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By  George Bevir Published  March 2, 2009

Warnings from Etisalat and QTel about the growing threat to customers from scams suggest that telecoms related fraud is on the increase.

Two of the region's largest telecoms operators had to warn their customers last month to be aware of scams that promised prizes in exchange for personal information.

Qtel contacted its customers to warn them about illegitimate operators looking to harvest their mobile phone numbers, while earlier in the month Etisalat alerted its customers to fraudsters posing as Etisalat employees on the look out for sensitive security details.

Such scams are by no means new, and fraud perpetrated against telecoms companies is almost as old as the networks themselves.

But there are fears that it is increasing; both QTel and Etisalat issued their warnings after a spike in occurrences, and with many countries in recession and more sliding towards financial misery, experts warn that financial pressure on fraudsters and customers could cause it to rise further.

The CEO of the UK's telecoms industry fraud forum, Jack Wraith, says that one of the effects of the economic downturn could be to make people who may have been adverse to scams and schemes more receptive to them.

"If something is presented to them as a potential for them saving pennies, they'll go for it," he says. Wraith says that insurance claims in the UK have already started to rise, possibly as a result of cash-strapped customers who want to trade an old mobile for a new one but aren't prepared to pay for it.

Cost implication

With customers potentially becoming more receptive to dubious methods of cutting costs, an environment in which fraudsters flourish could be created, which could put further pressure on the profitability of telecom operators.

Fredrik Bäckström, marketing director of Swedish firm BassetLabs which provides fraud management solutions to clients in the Middle East and Africa including Zain and Etisalat, estimates that customer related fraud can cost 1%-10% of revenue.

Operators are reluctant to reveal the extent of any losses they may have suffered, which makes it difficult to estimate the cost to the industry, but the Communications Fraud Control Association in the US estimates that annual global fraud losses in 2006 were in the region of US$54-$60 billion, which it says represents approximately 5% of telecoms revenue.

The GSM Association's Africa Fraud Forum chairman, Ade Banjoko, agrees that it is difficult to put a figure on it but he estimates the cost to operators in Africa is "well over 30% of profits".

Dial through fraud

The messages that Qtel warned its customers about instructed customers to dial a two digit code followed by the ‘# ‘or ‘*' key, and then a phone number. The phone number is usually a long distance operator, while the two digit number is a call forwarding activation code, enabling the initiator of the spam message to place calls that are billed to the customer's phone.

Dial through fraud scams can be used by fraudsters who charge their own customers to use the network at vastly reduced rates. In the UK, some fraudsters even operate a pizza delivery style service and will deliver a handset which can be used for half an hour in exchange for a few dollars.

Although such a situation has not occurred in the Middle East, the demographics of the region could make it an attractive target for scam artists.

"The danger in the Middle East is you have very high populations of immigrant workers and they are a natural target to sell illegal services to," Wraith says.

"They have the requirement to want to call back to the Philippines, for example, and if they can do that at less than the market rate, then there is an attraction there."

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