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Know Your Customer


The widespread adoption of smartphones worldwide has led to a significant increase in digital data sharing. Customers are now required to provide personal information through online banking apps and rely on their phone numbers for everyday tasks like food ordering.

However, the telecom industry continues to face challenges related to fraudulent activities such as SIM swap fraud and data theft, primarily due to insufficient identity verification measures. Despite advancements in remote operations, identity fraud and financial crimes still pose a threat to the industry.

Frauds targeting the telecom industry primarily exploit vulnerabilities in mobile devices used for online transactions and sensitive communications. Even minor weaknesses in mobile networks can enable fraudsters to engage in identity fraud, payment scams, and account takeovers. A notable example is Telefonica Group, a telecom company with an annual revenue of $49.2 billion in 2020, which incurred a staggering $915 million loss to fraudsters and criminals, according to the Communications Fraud Control Association (CFCA).

Scammers are increasingly utilizing fraudulent methods like SIM Farms, leveraging the free services offered by the telecom industry. Through this approach, fraudsters accept payments and send SMS messages to thousands of random recipients in an attempt to obtain personal information. If successful, they utilize the acquired data for SIM swaps, a form of identity theft that targets mobile phones to gain access to social media accounts, bank accounts, and even cryptocurrency wallets by intercepting one-time passwords (OTPs).

A recent example involves the telecom giant T-Mobile, which faced SIM swapping attacks and code theft orchestrated by an extortion gang called Lapsus$. However, SIM swapping fraud is not the only concern. Phishing SMS techniques are also employed to target telecommunication companies sporadically. For instance, there have been instances of large-scale SMS messages promoting fake financial aid programs in Ukraine. Phishing scams have persisted even during the COVID-19 pandemic, with fraudsters attempting to gain access to payment details by exploiting fake vaccination programs.

Identifying and Eliminating Frauds

SIM swapping is made possible when a customer’s personal information is transferred to the SIM of an online scammer using techniques like hacking. This kind of scam not only makes the customers’ personal information vulnerable to misuse but also brings the risk of hackers gaining access to other related information that is linked to their SIM cards. This information may include e-mail credentials and banking details. Telecommunication companies must adopt a risk-based approach to identify and eliminate such fraudulent activities.

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5 Best Practices for Preventing Telecom Fraud | TelNet Worldwide

 After the telecom industry gave its customers zero rate calls, it became clear that the sector needed and used the best available preventive measures. There has been a 2500% rise in calls and SMS messages to Ukraine since the Russian invasion earlier this year. As of now, telecom companies must do even more and make efforts to detect fraud while ensuring a fair service usage policy. There must be systems in place to monitor customers’ usage of telecom services, as well as the monitoring of networks and other data sources involved when there are activities deviating from standard procedures. In this way, telecom companies can detect and report suspicious activities.

There are now robust solutions available in the market for telecom service providers to keep an eye on suspicious activities and identify SIM swap frauds through devices that show unusual usage patterns. Telecom companies that monitor the red flags in mobile service usage are able to successfully combat fraudulent activities. This is done by detecting unusual activities in volumes of traffic coming from a specific location through mobile devices that send large numbers of SMS containing a link. Suspicious activities can also be detected through IMEIs that show relatively higher data consumption compared to other devices in a short span of time.

How the Telecom Industry Can be Secured

Know Your Customer (KYC) is the process of verifying customers’ identities that is implemented by banks and any other financial institution dealing with monetary operations. It is aimed at preventing the risks of identity fraud and keeping an eye on both customers and telecom service providers. In several areas, KYC measures are encouraged by governments as part of AML (Anti-Money Laundering) regulations and as part of measures to secure mobile operators from unwantedly becoming the source of money laundering and terrorist financing. 

Even in areas where KYC measures are not encouraged by governments, telecom operators must incorporate robust identity verification measures to prevent fraudulent entities from accessing their system. Online identity verification service providers utilize technologies like biometric facial recognition along with thousands of AI algorithms to authenticate the identities of telecom companies’ customers. KYC compliance ensures that companies run background checks on their customers to identify whether they are linked to PEPs (Politically exposed persons) as well as checking for their presence in global sanctions lists.

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