Luke Taylor, CFCA Administration, Founder, Lateral Alliances

Fraud is not a new problem, it is not a first world or third world problem, it is not just perpetrated against innocent consumers. Fraud is undertaken throughout the globe, it impacts individuals, businesses, organizations, governments, and society as whole. As with the recent pandemic, it does not differentiate age, race, ethnicity, sex or any other demographic.

This article is focusing on just one vertical market when it comes to fraud – Telecommunications.
So let us start… below is a picture of a $1 dollar note, in today’s economy, a dollar will not get you very far, probably not even a cup of coffee…

Below is a picture of a $100 dollar note, with this you can probably dine out well for two… 

Below is 100,000 dollars in $100 notes. Today, about 34.1% of Americans earn an annual salary of over $100,000, A typical US worker earns $94,700 per year. Does not look much when you see it below…

Below is 1 million dollars in $100 notes. Everybody’s dream of winning a lottery, right? Bureau of Engraving and Printing states that all US bills weigh a single gram. This means that $1,000,000 (million) in $100 bills weighs around 10 kilograms (22.046 pounds).

1,000,000 (million) in $100 bills is about the same weight as your average French Bulldog… being a French Bulldog owner, I would gladly trade him in for the same weight in cent coins…

However, if you wanted your million dollars in single dollar bills, that same amount of money would weigh a metric ton (2,204.623 pounds).

When it comes to a billion dollars, this is a little bigger in size, if you laid 1,000,000,000 (one billion) one-dollar bills end-to-end it would measure 96,900 miles, that would be nearly circling the Earth four times…

If you were lucky to be worth $1 billion dollars, you would be joining the other 614 other billionaires in the USA.  $1 Billion would be more than the Individual Gross Domestic Product (GDP), of the world’s 13 poorest countries.  If you were planning to move your billion dollars in $100 notes, you would need a few pallets. (as seen below)

Now that was a rambling introduction to the topic of this article…  Putting Telecom Fraud Loss into Perspective.  Why such a rambling introduction?  Well, I wanted to put some context to the significance of the volume of money that telecommunication operators are losing in telecom fraud.

Communications Fraud Control Association (CFCA) undertakes a survey and study every two years, the last being in 2019. In this survey it showed that the global fraud loss was estimated at $28.3 Billion (USD). This equated to 1.74% of the 2019 estimated global telecom revenues, with the top 5 fraud types accounting for 54% of all fraud losses. This was an increase from the 2017 figures of 1.27% loss of global telecom revenues with this increase in 2019 attributed to several factors including:

• Cross-Industry Scams (Wangiri, Account Take-over & financial scams)
• Less collaboration and coordination within the industry with law enforcement
• Increased consumer data attacks targeting consumer causing cross over impacts of fraud scams between industries
• New service and technology revenues starting to be mass utilized and impact revenue streams

73% of the respondents in the 2019 survey said global fraud losses had increased or stayed the same with 66% of the respondents saying fraud had trended up or stayed the same within their company.

The fraud methods and fraud types summarized below.

If you were not interested in the fraud methods and fraud types, you would I hope all agree that $28.3 billion is a lot of money, it is certainly not loose change and certainly a number that should not be ignored or brushed under the carpet, it is a lot of zeros, in fact, 9 of them… 28,000,000,000

I am going to try and put that number into some form of context, so please bear with me…

$28.3 Billion dollars would place you 100th out of 190 countries in the world in GDP replacing Estonia.

$28 billion dollar equates to the same weight in 100-dollar bills as a Boeing 747 (That is 280,000 kilograms, 308.6 US tons or 617,294 Pounds)

Using the same $28.3 Billion dollars lost to fraud in 2019 if we use the estimated $1.5 trillion revenue in the telecommunications industry globally in 2020 means that approximately 1.86% of global telecom revenues could have been lost to fraud.

So, what could that mean to a CSP?

Let us look at some of the big telco players to put the estimated fraud loss inline with the telecom operations.

• AT&T 2020 with a $171.8 billion annual revenue in 2020 could mean that a potential revenue loss of $3.1 billion to fraud.
• Telefonica Group with a $49.2 billion annual revenue in 2020 could have possibly lost $915 million in revenue to fraudsters and criminals.
• Vodafone Group, a $50.0 billion a year business could have let $930 million walk out the door…

These are HUGE numbers, of course, companies like AT&T, Telefonica, Vodafone have established and extensive fraud and risk management infrastructure, systems, and personnel to manage and control and mitigate much of the fraud risks and the related possible losses and revenue leakage. But what if we say that only 5% of that potential 1.86% ‘fraud loss’ is lost to fraud by each of these telcos…

The numbers are still not insignificant…

Of course, all these figures, numbers, and stats are surmising what happened and making fraud loss a blanket figure across the board. We know of course this is not the case. I am also making assumptions on what happened to telecoms fraud in 2020, but what we do know is that 2020 and 2021 were years were extreme outliers, 2020 and 2021 we all hope will not be repeated ever again or at least in our lifetime.

The world literally stopped on its axis, it changed, possibly changed forever, a pandemic that hit the globe in the early part of 2020 meant the world had to adapt and change, our lives, social, home and work life had to change and evolve, there were no choices.

Sadly, illness and death has impacted every country, touched many families. Extreme measures to contain the spread of the virus, meant remote working, companies closing or temporality stopping trading, furlough of employees was introduced, unemployment for the unfortunate, increased requirement for communications services, etc. all brought challenges, risks and threats to individuals and businesses.

Consumer scams around the world that preyed on the vulnerable and alone were a pandemic in their own right, security of remote working, employees not overseen, call centers working remotely, processes quickly adapted and changed, hands off oversight and management, all became possible weaknesses for fraudsters to abuse and take advantage off.

How did telecom operators manage and oversee their employees remotely?
Who was monitoring the remote call centers when it came to sensitive customer data?
How were phones, sims and services being provisioned?
Who was controlling changes to the network?
How were finance and audit teams managing remotely?
How did fraud departments react to the changes the pandemic introduced?

Did all telecommunications service provides manage to adapt and implement risk management strategies to mitigate risk and financial loss as their consumers demanded more services, improved quality to manage from working from homes, businesses locating to kitchen tables in a timely and efficient manner. The change in employee situation, as employees had to adopt new meeting and communication technologies and channels as they worked remotely from newly made studies in spare rooms and looked to purchase a depleting stock and availability of web cameras.

So many questions and I have not finished…

What will the 2021 Fraud Loss Survey uncover?
Will the pandemic have a direct impact on fraud losses?
Will the modus operandi have evolved or changed since 2017?
What frauds will be making a direct impact on CSP’s revenues?
What will be the hard dollar losses projected in 2021?

We will have to wait and see when the survey is undertaken and the report produced later in the year.
Of course, with all such collaborative studies, the need to have feedback from a wide range of telecom service operators, large, medium, small, mobile, fixed, cable, satellite, triple play, quad play, new, established, start-ups and incumbents from all geographies is essential. So, if you want get a better picture on fraud losses and if we can recognise improvements, recognise new issues, see emerging threats, please make sure you contribute to this insightful study.