Earlier this week, KPMG launched its biennial India fraud survey which looks at how tough it is to understand the modus operandi of the fraudsters. Thanks to technology, frauds are becoming increasingly sophisticated over the last two years.
The world over, the telecom industry has had its share of losses due to sophisticated technology-aided frauds. As per the survey, globally, telecom frauds are estimated to cost the industry US$40 billion (which is roughly 2 percent of the global telecom revenues), despite significant efforts made by operators and their IT vendors to limit theft.
"Operators' billing systems and network vulnerabilities are always key target areas for most fraudsters who exploit any weaknesses in these areas," the survey said.
For Indian telcos, fraud is one of the biggest risks confronting them, even as they battle it out in the market with their competitors and declining ARPU (average revenue per user), margin pressures, and other growth-related challenges.
Fraud primarily occurs due to weak internal controls. In the case of the telecom industry, it also affects the customer. "For example, a telco customer suffers when a fraudster, taking advantage of the poor identity checks at the telco, is able to use the telco network for voice/data connectivity and the bill has to be footed by the customer. This problem is worsened in case the telcos have mobile money offerings. In such a situation, the customer also stands to lose his mobile money balance," the survey said.
The survey lists out some best practices as part of their anti fraud programs:
• Social media monitoring: Fraudsters are using social media to communicate and misuse any existing gaps in telco networks--whether it is billing or other network related gaps. Further, some fraudsters even float Web sites luring the public with low or free call rates and other features. "To combat this, companies should proactively monitor social media to identify and block any network-related gaps, and premium number ranges and sites that result in unintentional calling by subscribers only to find that they have been duped," it said. "Additionally, they could also proactively educate their subscribers to not fall prey to such schemes."
• Setting up a fraud control unit (FCU): This utilizes data analytics to identify fraudulent trends. Telcos have started considering implementation of FCUs by setting up dedicated teams who use pre-defined data analytics routines to continuously monitor voluminous data--both within and outside their ERP--to proactively identify red flags that could prevent fraud-related losses. "This is specifically being used in telcos to identify fraudulent patterns in the procurement process, the commission-payout process, accounts payable process, etc," the study said.
• Utilizing sector-focused forensic experts: Telcos can deploy resources with specialist forensic skillsets to deal with telecom specific frauds/issues such as subscription frauds, unauthorized use of network, leakage of sensitive information, interconnect billing problems, misconduct in award, and execution of large scale outsourcing contracts, etc.
• Strengthening controls around customer identification: Stringent know-your-customer (KYC) norms and de-dupe checks based on available patterns are being implemented to detect impersonators who intend to defraud the telco by assuming false identities and using the network without any intention to pay for it.
According to the study, telcos need to follow a two-pronged strategy to combat frauds. "This should consist of setting up a FCU to proactively monitor transactions in processes that are more vulnerable to manipulation, and simultaneously adopting a co-sourcing model with external sector-focused forensic experts to effectively deal with frauds, identify suspect/s and modus operandi with evidence, so that commensurate action can be taken by the telcos which then acts as a deterrent for the future," the study added.