Whenever people ask me about fraud in telecoms, I try to get one thing straight at the beginning. Do they want to know about the kinds of fraud committed by employees, committed by the “customer” (often in collusion with employees) or committed by other telcos? In reality, “Fraud” divisions within telcos often deal with just one or two of the three, and leave the rest for somebody else to cover. In some ways it makes sense to split up responsibility for fraud. The skills needed to analyse call patterns for indicators of fraud are not very similar to the skills needed to monitor employees which are dissimilar to the skills needed to understand the weaknesses that might be exploited by another telco. But splitting up responsibility, or focusing attention on one kind of fraud at the expense of others, can leave gaps in a telco’s defences. One of the biggest current gaps is protection against the use of GSM gateways, also known as “simboxes”.
GSM gateways are devices that allow a call on a fixed-line network plugged in one side to be connected to a mobile network on the other side. By bridging the world of fixed and mobile, they offer a clever way to exploit price differentials of a mobile network provider. The fraud requires the use a GSM gateway stuffed full of SIMs charged at standard retail rates. These get sited within range of a radio antenna and are used to connect calls to the victim network instead of using a normal fixed interconnection between networks. Instead of paying the full price to terminate an interconnect call legitimately, the offender instead pays the retail cost of a local call. This means the mobile network is cheated out of some of its revenues. In addition, concentrating traffic in one cell may lead to disruption of service for legitimate mobile customers. To counter poor service, the unwary mobile network operator may even find itself making an otherwise unnecessary investment in extra base station capacity. But this kind of fraud gets little attention. Why is that?
- The fraud can fall into a grey area legally. Contracts may not be tightly enough worded in stipulating that retail SIMs are not to be used by non-retail customers. In addition, legislators and regulators may not be keen to intervene. GSM gateways may lead to discounted services for the public, and are a back-handed way of eroding mobile termination charges without needing direct intervention.
- Telcos using GSM gateways may be completely legitimate in most other respects. Few vendors or consultancies specialising in fraud and revenue assurance want to alienate potential customers, so often prefer to keep quiet rather than highlight this topic.
- GSM gateway fraud challenges most preconceptions about fraud and how to detect it. For example, there is no link between this kind of fraud and bad debt. On the contrary, exploiters of GSM gateways may be mistaken for excellent customers, because they have very large bills but pay them promptly.
Like any kind of fraud, it is impossible to accurately estimate the impact of GSM gateway fraud. What we can say for certain is that vigilant mobile operators will suffer a lot less than those who do nothing to counter GSM gateway fraud. A two-step approach is needed: tight wording of contracts to clarify that retail contracts are not available for businesses using GSM gateways as an alternate means of interconnection, coupled with constant monitoring and prompt termination of contracts. To find out more, you can check out the site of Revector, a new company focusing on this area, or read this article which promotes Revector but also lists some of its competitors specialising in GSM gateway detection.