Identity fraud in Telecommunication

​​​What is identity fraud in telecom?

Su​bscription fraud in telecommunication is a widespread telecom fraud.

Such telecom frauds involve identity theft or the use of fake identities at point of sale, enabling either the fraudulent use of telecom services or the use of such services for subsequent fraudulent activities.

The bad news?

As the services offered by MNOs flourish, so does the potential for subscription fraud.

Once a fake subscription is established, the fraudster then has access to a wide range of value-added services, including call-related, TV, and internet, and new mobile financial services such as mobile banking and mobile payment.

The result?

CFOs and heads of fraud departments for the major MNOs are faced with a big challenge to secure the many channels fraudsters can target.

According to risk management and analytics expert Neural Technologies, there are over 200 types of telecommunication fraud related to identity theft or ID fraud.

Ho​w does identity fraud in telecom happen?

During the consumer acquisition stage in the MNO's store, consumers must usually provide ID documents along with utility bills and bank account details.

Identity verification service is key to the subscription process and is usually carried out manually by a sales assistant.

However, manual KYC (Know Your Customer or Know Your Client) checks are ineffective and a waste of resources.

The failure to detect forged or stolen IDs at this point in the onboarding process means fraudsters can walk out of stores with high-end, heavily subsidized smartphones, and it may take some time before the fraud is discovered.

So-called SIM swap fraud is another major problem, whereby scammers use fake IDs to gain access to a legitimate subscriber's SIM card.

They then use this SIM to authenticate transactions with the real subscriber's bank, make online purchases, money transfers and run huge costs in the legitimate subscriber's name.

Manual and non-automated identity verification service is clearly ineffective and exposes to a major risk of telecommunication fraud. 

Why is strong identity verification service critical for MNOs?​

Effective identity verification service is key to tackling telecom fraud.

The challenge to MNOs is threefold.

• They need to ensure they are compliant with local and international regulations;
• Their CFOs and Revenue Assurance departments need to reduce the heavy financial burden of fraud;
• they must protect their brand image to maintain their reputation as operators one can trust.

Compliance with regulations

Public authorities and governments are requesting ever-stronger identity verification services.

For instance, most governments now impose a mandatory registration of prepaid mobile SIM cards with a valid proof of identity.

As of  January 2020, GSMA research found that the governments of 155 countries mandate SIM registration policies with strict identity verification services to tackle national security issues and criminal behavior.

Compliance is critical for MNOs, especially as 73% of all SIM cards globally are prepaid according to the GSMA.

Moreover, mobile financial services play an increasingly important role in the service offered by MNO's portfolios. As such, they must meet so-called Know Your Customer (KYC) ID verification procedures.

Non-compliance with such procedures can lead to fines and disablement of SIM cards and services.

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​​​The financial burden of telecom fraud

Telecommunication fraud resulting from insufficient ID verification procedures can take months to be discovered. As a result, MNOs are subject to considerable financial cost, both direct, with the loss of a heavily subsidized handset, and indirect, through all the services an MNO offers through a single subscription such as foreign calls, internet, TV, and mobile financial services.

Neural Technologies estimates the annual cost of identity fraud to the telecoms industry at €40 billion.

And according to the Global CFCA Telecom Fraud, subscription or identity fraud represents 35% to 40% of all fraud undergone by the telecoms industry. Furthermore, Neural Technologies claims this can represent up to 10% of an MNO's bottom line.

Costs of damaged brand image

Besides, the indirect costs associated with identity theft can mount up quickly.

MNOs need to act fast to address the damage caused to their reputation due to poor user experiences.

This includes compensation and incentive payments, updating of security parameters in back-end systems, and reissuance of SIM cards, not to mention any financial liability issues with banks.

Furthermore, long and costly advertising campaigns to restore trust with consumers, investors, partners play a big part in these costs. 

Thales in the field of identity verification service

Thales is the leading supplier of secure ID documents for governments and has more than 15 Mobile Network Operators references.

We work closely with identity fraud experts worldwide. Through the many ID projects we have rolled out, including securing national borders for many countries, we have built up a raft of experience in the detection of fake documents.

Identity fraud techniques are evolving constantly, and it is vital to stay ahead of the game.

Thales closely monitors any shifts in technique and immediately integrates them into our portfolio of identity verification services.

Our solutions perform specific and automated cutting-edge graphical ID documents and biometric checks such as facial or voice matching, including liveness detection, in a matter of seconds, freeing up our customers to focus on the customer experience.

We combine our in-depth knowledge of both public and private sectors to help MNOs slash subscription fraud with identity verification services that meet government-grade security standards, comply with national regulations, and easily integrate into their existing environment.

Our worldwide capabilities enable the deployment of platform and services, as managed services or on-premises.

Find out more about Thales Trusted Digital Identity.

​Find out more about how Thales solutions help MNOs slash identity fraud​