Telecom Fraud on the rise: 2021 CFCA Global Telecommunications Fraud Loss Survey
During World War II, Winston Churchill famously quipped, “You never let a good crisis go to waste.” Fast forward to 2020, when the Covid-19 virus caused a global economic shutdown. For a time, the amount of fraud impacting our industry decreased significantly. But, as workers shifted to a “new normal” of working from home and as the global economy has reopened, so has the amount of fraud and abuse impacting our industry.
In 2021, total global telecom revenues[1] are estimated to be approximately USD 1.8 Trillion. The total amount of telecom revenue loss due to fraud is estimated to be 2.22% of revenues or $39.89 Billion.
Compared to 2019, fraud losses increased 28% or approximately USD 11.6 Billion. To put that increase into perspective, it is the market value[2] of US companies such as TD Ameritrade Holding, Hartford Financial Services, O’Reilly Automotive, and ADT.
There are many factors that are contributing to this increase in fraud. The primary reasons are due to:
- Increase in cross-industry targeted social engineering schemes (Wangiri, SMS Phishing/Pharming, Social Engineering, Robocalls)
- Increase in financial services impersonation frauds using stolen credentials from data breaches
- Use of faceless transaction portals to commit Subscription Fraud and Account Take-overs
- Increase in the theft of stolen equipment and services
- Compromise of network, device, or configuration weaknesses associated with voice-over-IP technologies
- Abuse of Voice & Data Service Terms & Conditions
The increase is also associated with a rise in demand and consumption of telecommunications services. The shift to working from home has fueled insatiable demand for network connectivity and infrastructure. Similarly, the temporary shutdown of entertainment complexes and outdoor entertainment venues due to social distancing requirements has greatly increased the usage of various digital platforms, including social media, gaming, video conferencing, and OTT applications. Mobile voice traffic has also increased, with many prominent communications service providers reporting an enormous escalation in voice traffic since the outbreak of the pandemic. The increase in usage is also driving the increase in the amount of reported fraud loss.
Fraudsters also use the Covid-19 pandemic crisis to take advantage of unsuspecting victims through targeted social engineering methods such as CLI/ANI Spoofing, Wangiri call-back schemes, SMS Phishing/Pharming, Email Phishing/Pharming and Robocalling. They also harvest personal identifying information to commit subscription fraud and take over victims’ accounts.
Rahm Emanuel, an American Politician, former Mayor of Chicago, recently echoed Winston Churchill when he said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” I agree with this sentiment. As an industry, I believe we can take the recent changes within the telecom industry to better secure and protect our business from fraud and abuse. We have an opportunity to re-frame what good fraud management and security looks like for our industry. By working together, we can make a difference in protecting our customers and our businesses.
Highlights from the 2021 CFCA Fraud Loss Survey
Top Fraud Methods Reported in 2021
| Fraud Method | Description | $USD (Billions) |
| Spoofing (IP or CLI/ANI) | Manipulation of the IP address/CLI/ANI to hide someone’s true origination or identity. | $2.63 |
| Wangiri (Call Back Schemes) | Call back fraud schemes | $2.23 |
| SMS Phishing/Pharming | Theft of personal info or credentials via SMS hacking, phishing, vishing, etc. | $2.03 |
| Subscription Fraud (Application) | Creation of false details to gain access to goods and services with no intention to pay | $2.03 |
| IP PBX Hacking | Compromised IP PBX used to make fraudulent calls | $1.82 |
| Abuse of network, device or configuration weakness | Exploitation of a configuration weakness to gain access to a network or device; Includes VoIP equipment such as a modem or router | $1.62 |
| Account Takeover | Manipulation and utilization of existing customer’s account to gain access to a device or service | $1.62 |
| SIM Swapping / SIM Jacking | Replacing a new SIM card to gain access to the device or service | $1.62 |
| Phishing / Pharming | Theft of personal info or credentials via email hacking, phishing, vishing, etc… | $1.62 |
| Robocalling | Use of computerized auto-dialers to deliver pre-recorded messages to perpetrate fraud | $1.62 |
Top Fraud Types Reported in 2021
| Fraud Type | Description | $USD (Billions) |
| International Revenue Share Fraud (IRSF) | Artificial inflation of traffic terminating to international revenue share providers | $6.69 |
| Traffic Pumping (includes: Domestic Revenue Share, Toll Free Traffic Pumping and International Toll Free Traffic Pumping) | Abuse of Carrier Interconnect agreements through such things as Traffic Pumping, Switch Access Stimulation, 8yy Dip Pumping and CNAM Revenue pumping schemes | $4.54 |
| Arbitrage | Exploitation of the differences in rates between different countries | $3.82 |
| Voice Interconnect Bypass (e.g. SIM box) | Unauthorized insertion of traffic onto another carrier’s network. This includes Interconnect Fraud and GSM Gateway Fraud or SIM Boxing | $3.11 |
| Theft / Stolen Goods | Equipment theft | $3.11 |
| Domestic Premium Rate Service (In Country) | Artificial inflation of traffic terminating to domestic premium service providers | $2.39 |
| Commissions Fraud | Schemes used by dealers to collect additional commissions and spiffs | $2.15 |
| Data Charging Bypass | Exploitation of network and protocol misconfigurations to bypass charging. For example, interjecting voice traffic onto Viber, Skype or WhatsApp | $1.91 |
| Voice Service Reselling (e.g.: Call Selling) | Resale of voice services. | $1.91 |
| Device / Hardware Reselling | Resale of equipment such as handsets, tablets, IPTV devices, routers, etc. | $1.67 |
About the CFCA Fraud Loss Survey
The CFCA conducts the Fraud Loss Survey to capture a broad view of how much revenue the telecommunications industry is losing, where it is being lost, and what the future holds for fraud losses and fraud management. The full details of the survey results are available to the CFCA membership and related associations that participated in the survey. To learn more, contact the CFCA at fraud@cfca.org.
References
[1] Global Telecom Services Market Size Report, 2021-2028 https://www.grandviewresearch.com/industry-analysis/global-telecom-services-market
[2] Market Values: https://www.economywatch.com/forbes-global-2000-americas-largest-companies
Jacob Howell is an experienced Revenue Assurance and Fraud Management practitioner with 25 years of experience working with top wireless, wireline, a mobile virtual network operator (MVNO), and VoIP service providers. Drawing upon those experiences, he currently leads Subex’s Business Consulting group for North America.
Mr. Howell is also a Certified Data Scientist, Blockchain Certified Expert (BCE), Certified Communications Security Professional (CCSP), Executive Secretary of the Communications Fraud Control Association (CFCA), the author of the CFCA’s Global Telecom Industry Fraud Loss Survey since 2007, and a popular presenter.
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