Why Telecom Fraud Regulation Needs To Address All Market Players

Managing Director at AB Handshake Corporation with over twenty years of executive experience in the Telecom industry.

The first objective of collaboration between regulators and businesses is to enhance existing standards and procedures. Regulators also devote a substantial portion of their efforts to problem-solving as well as protecting business participants and end users by establishing new regulations.

The most serious recent concern on regulators’ radar within the telecommunications business is fraud. Telecom fraud is a known cybercrime, usually committed on an international scale, and is featured on the crime lists of Interpol and other relevant international organizations.

Cybercrimes are some of the most inventive and difficult crimes to fight. The difficulty of applying countermeasures stems from the fact that fraud methods and technologies continue to rapidly evolve and vary.

Telecommunications fraud directly affects end users, telecom providers, carriers and other market participants. Such cases affect several innocent parties, which underscores the need for new measures and regulations.

Below, I’ll provide an overview of a couple major global initiatives underway to provide better and faster responses to industry fraud and examine the fraud problem from various perspectives (end user, provider and regulator).

Telecom Fraud And Its Impacts

Telecommunications fraud has been around for a long time. According to Europol, telecom fraud is a major problem for the telecommunications industry. As new technologies spread, fraud crimes have become master strategies to steal money and personal identities, among other things.

Telecommunications fraud comes in many forms, but all of the schemes ultimately seek to extort money out of subscriber or telecom provider accounts. In every kind of fraud, more than one party eventually gets hurt.

The first party hurt by fraud is the person who uses the telecom services. This individual receives a wangiri call, a robocall or another type of fake call. The prevalence of these kinds of scams frustrates subscribers.

Consumer dissatisfaction has led many people to stop answering their phones. This sort of behavior ultimately leads to revenue loss for the operator. Robocalls, in particular, brought a lot of attention to the problem of telecoms fraud, which led regulators to place it on their agendas.

To be clear, the types of fraud that cost the industry the most money are not robocalls. International revenue sharing fraud, which uses different methods, currently causes the highest financial damage to the telecom industry. This type of fraud includes schemes such as private branch exchange hacking, wangiri and wangiri 2.0 (which targets brands instead of individuals). In 2021, the telecoms industry lost $6.69 billion to this type of fraud.

Regulation Against Telecom Fraud

In the regulatory ecosystem, regulators and the initiatives they propose focus mostly on protecting the interests of consumers. Telecom providers rarely receive any significant protection. In the meantime, telecom companies bear the most challenging part of the fraud outcome, including financial losses and reputational problems.

The United States leads the telecoms scene with the industry’s only accepted standard: STIR/SHAKEN, which stands for Secure Telephony Identity Revisited and Signature-based Handling of Asserted information using toKENs. This definition explains how telephone service providers should implement this technology to prevent phone number spoofing. It should be noted that this standard only applies to robocalls and spoofed calls and not to other telecoms scams.

The regulation also only applies to operators based in the United States. Many carriers are adding more modern solutions capable of defeating a wide range of fraud types, on top of this standard, though.

The U.S. Federal Communications Commission has been searching for a solution to stop robocalls since 2014, and the requirement to use the STIR/SHAKEN protocols took effect on June 30, 2021, for major telecom providers. This time lag between the problem and any proposed solution demonstrated that we all (telecom market participants, regulators and subscribers) are losing this game to scammers. By the time that standard was adopted, other more serious types of fraud had emerged, and better countering solutions had been introduced to the market.

In the U.K., a new law will impose stronger obligations and higher penalties for market participants. The law does not try to protect against fraud, but tightens regulations, driving market participants to implement fraud remedies independently. The proposal’s maximum penalty is 10% of the company’s revenue, which may be greater than the financial cost of the crime and should encourage telecom providers and carriers to implement anti-fraud mechanisms in their operations.

How Effective Are Telecom Anti-Fraud Regulations?

The global development of cybercrime has driven governments to work more on legislative revisions, frequently increasing their resources to combat such crimes. The majority of the guidelines established globally in this debate are consumer-centric and focus on protecting subscriber rights.

But telecom fraud occurs within the telecommunications business itself. This problem can only be alleviated through new market cooperation and new rules for all market participants. When combined with cutting-edge technologies such as AI, ML and math analysis, I believe this strategy is capable of eliminating fraud completely.

Public education, disseminating knowledge on how telecommunications scams work and presenting alternatives available to eliminate such fraud are effective methods for dealing with this problem.

So far, the problem has been primarily highlighted from the user perspective, with mainly telecommunication media highlighting the impact that all market participants share in this game. Providing a realistic picture of how complicated and innovative telecoms fraud is could aid in the formation of a new mindset toward the problem and the strategy toward eliminating it both by means of technology and regulation.

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