Fraud buck will stop with network operators

Regulators will penalise network providers who don't check for fraud, and are pushing for more powers to regulate paid-for Internet services

ICSTIS, the body that regulates premium-rate phone services in the UK, is to bring in tough new guidelines which will make network operators responsible for checking contractors' backgrounds.

The move is an attempt to cut down on fraud, such as the notorious rogue diallers that have tricked many dial-up users out of hundreds of pounds.

Scams involving premium-rate services including rogue diallers — pieces of software that a user unknowingly downloads on to their computer that secretly reroute a modem connection via a premium-rate telephone number — are being perpetrated by "electronic muggers", according to ICSTIS.

The new ICSTIS Code of Practice, which will come into force in September, is designed to reduce "electronic mugging", according to ICSTIS Chairman Sir Alistair Graham.

"My priority is to stamp out electronic muggers," said Graham, at the launch of the code of practice on Monday morning.

"The new Code of Practice puts the emphasis on the network provider to perform proper due diligence on their contractors, which should reduce the possibility of fraud," Graham told ZDNet UK.

Network providers who do not check their contractors to weed out "bad merchants" will become liable for any fines imposed by ICSTIS for bad practice or fraud, plus liable for refunding those consumers who suffer fraud.

"Due diligence is not nuclear physics," said George Kidd, director of ICSTIS, who claimed that some fraudsters have been using names that are clearly fictitious.

"It's not difficult not to sign up people named after cocktails, for example. It stands to reason to check out 'Mr Pina Colada'," Kidd told ZDNet UK.

Currently network operators such as BT voluntarily police potential fraudsters, but ICSTIS wanted more "effective statutory ability", said Kidd.

Although ICSTIS saw a 75 percent drop in complaints last year, after it was granted stronger powers to fight fraud, the regulator still wants to "stimulate collective action in the telecoms industry" to "drive crooks out of the market", said Graham.

"Consumers can unwittingly have money squeezed out of them because of lack of transparency about which numbers are premium rate," Graham added.

As well as the new Code of Practice, ICSTIS said it will work with the telecoms industry to educate consumers about scams or bad practice, and is seeking to enhance its relationship with the police by "understanding what their needs are," in providing quality of evidence, and speed in evidence gathering.

The regulator also wants to react to the increasing technological convergence within the telecoms and paid-for-content broadcasting markets, to cut down on future fraud.

"It would be folly to think the criminals of tomorrow won't abuse the innovations of today," Graham said.

"We've seen a remarkable fall in the number of complaints, but we're dealing with the tip of the iceberg of infotainment," said Kidd.

Kidd said that communications regulator Ofcom was due to review the scope of ICSTIS' powers in the autumn, and that he would personally be pushing to widen ICSTIS' regulatory scope.

"I want to get away from 'premium-rate service' to [regulating] paid-for services and content. Basically, anything that appears as content on your telecoms bill," said Kidd. "I have an interest in data charging, say for music downloads. The price has to be clear. Consumers may know what the download vendor will charge, but they can't know what the service provider will charge for the bandwidth. This is not acceptable," Kidd added.