Why Telcos could never overcome Simbox Fraud since a decade Now

Simbox, Bypass Fraud/ Or Interconnect bypass Fraud has been one of the fastest growing Fraud Types In recent few years.  As per 2017 Global Fraud Loss Survey by CFCA, Global Fraud Loss Estimate stands at $29.2 Billion (USD) annually which is 1.27% of global telecom revenues.

Source CFCA Survey Results

Simbox Fraud / Bypass Fraud has been a significant fraud issue for more than a decade now. CFCA survey results across 2009 till 2017 clearly shows an increase of more than 100%  in Bypass fraud since 2013. In this blog, we shall discuss about factors that has contributed to this continuous increase in Bypass Fraud and reasons, operators have not been able to effectively mitigate Bypass Fraud.

Factors for continuous Increase in Bypass / Simbox Fraud:

• Reduced barrier for entry

Buying and operating SIMBoxs has never been easier with online stores, e-commerce websites,courses, forums and instant support availability.  This has led to an increased spread of VOIP based startups and subsequent increase in bypass fraud. VOIP based calling apps have also made customer acquisition easy by making them  easily available on  AppStore for Android & IOS users. For instance, a recent news from India covered the similar trend wherein those who wanted to make international calls from Gulf countries has to download an app called ‘dial to India’ Once this app is downloaded, they get a password for monthly subscriptions. The person sitting abroad will just dial the number in India, the call will bypass the VSNL gate and will directly route through the SIM box and will get connected from there. Read More

Few more such examples as below:

“Illegal phone exchanges thriving on SIM boxes”

VOIP exchanges used by ISI busted in Andhra Pradesh, India

• Competitive Landscape

Reduced margins on international traffic has resulted in wholesale traffic being mixed with internal traffic. Wholesale providers have also been increasingly offering non-CLI based options which could potentially end up in Grey routes. This fierce competition had led to increase in bypass traffic particularly in countries with higher landing costs.

Reasons Operators have not been able to effectively mitigate Bypass Fraud:

• Advancement in Sim-server Technology

Simbox have evolved from being a simple single box setup to a complex modular architecture. This architecture allows fraudsters to maintain all the simcards in a single place and using Antenna modules and multiplexers, fraudsters are able to distribute their operations in the market. In fact, Latest Simservers also comes with inbuilt anti-fraud detection solutions allowing fraudsters to  distribute his operations in multiple locations. This makes fraud detection very complex as fraud management teams have to device multiple strategies to beat fraudsters at their game.

• Regulatory Changes

Regulatory changes in certain markets have fueled increase in traffic for Bypass. Recent changes of regulations in European Union has also resulted in traffic with E.U been heavily being differentiated in price from traffic outside E.U thereby causing significant increase in Bypass traffic.

• Raising Concerns in Simcard Sales

Increased pressure to maintain sales and activation of new connections have resulted in dealers colluding with Bypass fraudsters. Bypass operations requires lot of sims to be activated in bulk and lack of effective subscriber acquisition controls have led to fraudsters taking advantage of it.

Fraud Management teams further have an uphill task in the Bypass fraud space as new technologies such as virtual sim’s would only increase the impacts on bypass of international traffic. It is hence important that they adopt a comprehensive fraud detection methodology to fight simbox frauds.

Nithin Gangadharan

Nithin has more than 10 Years of experience in Fraud Management. He started his career as an Implementation Consultant with Subex Ltd and has been part of many Fraud Management implementations across APAC & Middle East. He has also been a Subject Matter expert & Business Solution Consultant earlier. Nithin is currently working as Product Line Manager for Fraud Management and machine learning developments at Subex.