PABX fraud growth

This week we have David Cargill as guest editor. David runs the Operations Working Group at  the Internet Telephony Sevice Providers’ Association (ITSPA) and takes a special interest in VoIP Fraud. David has invited a number of experts to contribute guest posts on fraud related subjects. This ties in with the ITSPA/trefor.net Workshop on Wednesday that has VoIP fraud and WebRTC as its main themes. This is his first choice of post, in which PABX fraud growth and is discussed, is written by Manuel Basilavecchia – Co-owner, Sales and Marketing Director of NetAxis Solutions.

It is commonly agreed to estimate that the loss due to fraud in the telecommunication industry represents 0.5% to 5% of revenue of telecommunications operators.

Even if all of those scenarios are well known for years, many of them are still impacting the telecom industry. Of course, not only Telecom providers are impacted, as retail/corporate customers are impacted as well by telecom fraud.

In this article, we’ll focus on a specific kind of PABX fraud (and all mechanisms related) which is PABX hacking.

To make a fraud possible and generate money, a fraudster needs two things:  Traffic (generation) and a termination (Cash collection).

In order to generate the traffic the fraudster will hijack a PABX. Alternatively the fraudster will pay a third party to perform the hijacking. In that case, we’ll talk about IRSF fraud type (International Revenue Shared Fraud). Once the access to the PABX is effective, the PABX will be used as resource to generate calls to high cost destinations.  As the fraudster owns the numbers targeted by the fraud, a money flow will be established and the fraudster could retrieve the money.

At first glance, the mechanism is not that complex, but the thing is that it has worked for years and is still working nowadays.

Let’s try to figure out why

In most of the cases, hijack of the PABX is not that difficult. Indeed, very often the password by default has not been changed by the administrator. Also in case the password has been changed, a very basic password is used which is quite easy to guess by a fraudster. Alongside this, these systems are always subject to vulnerabilities which can be easily exploited by a basic hacker.

In most of the cases, that attack is made outside business hours  including weekends, assuming that the PABX activity is not monitored during these intervals.

In this way, the customer is even not aware that he has been victim of an attack.

This lack of monitoring during some times of the day/week has the consequence that very often the fraud is discovered when the customer receive his telecom supplier’s invoice.

There is also an aggravating factor which is the payment terms. Indeed, usually the billing period between retail customer and its telecom provider is monthly while the billing period for Premium rate numbers is weekly with as consequence that once the fraud is discovered, the fraudster already got the money and it is very difficult to get the money back (or withhold payment).

This is having negative consequence on the relationship between the retail or the corporate customer and the telecom provider. Indeed, as the fraud is involving international destinations, international carriers are part of the scheme.

Having several players in the scenario makes it quite complex and difficult to find a fair solution for all the parties and someone as to assume the loss generated by the fraud. Let’s consider a practical case that will illustrate all those considerations:

A fraudster buys some Premium rate numbers in a foreign country, keeping in mind the high cost per minute associated. As a second step, he will ask and pay (share revenue) somebody to generate traffic artificially towards those numbers.

Once the attacker gets access to the PABX, he will generate as much as possible traffic in the shortest time (night or week-end)

The fraudster will receive payment from the Premium rate number 7 days later.

Assuming that nobody will notice this traffic increase on customer side (same on operator side) this traffic will become visible when the customer will receive his telecom invoice; usually one month later.

Quite clearly it is too late to react and very difficult to avoid a loss. Indeed, the usual traffic flow for international traffic is the following. Traffic starts at a retail customer and is sent to his telecom operator. As it is regarding international traffic, the telecom operator will use one or several international wholesalers to terminate this traffic. Those international wholesalers could also use different suppliers to terminate the traffic. The number of intermediaries and the misalignment of the payment terms make it complex to withhold payment and very often a party will have to suffer a loss, in most cases being the retail customer of his telecom supplier

In case of fraud, the size of the operator could put him in a very difficult situation. There have been cases where the operator is forced to choose between losing the customer or have to assume the loss generated by the fraud. If the telecom supplier is not financially robust, this could have very big impact on business.

As a conclusion, to avoid risks linked to this type of fraud it is important to:

  • Take all appropriate measures to secure the PABX of the customer. This point is often difficult due to the diversity of the installed based or the lack of expertise at customer side. So a good information campaign needs to be setup.
  • Deploy a Fraud Management System that, in near real time, will look at any customer traffic patterns in order to detect abnormal activity in terms of volume or destination.

Of course, the FMS needs to be operated by people having skills in fraud detection, or better, expert consultants to detect fraud but also to avoid false positive cases and not block legitimate traffic (and revenues).

Additionally, this will provide the capabilities to the operator to mitigate the financial exposure by reacting quickly to fraud cases (reducing the impact) and by providing evidences in order to open claims towards authorities and upstream providers (Recovering losses).

Manuel Basilavecchia is Co-owner, Sales and Marketing Director of Belgium based NetAxis Solutions. Manuel Basilavecchia brings over 17 years of business strategy, innovation and technology experience to his role as co-founder. As Director of Sales and Marketing, Manuel is focused on developing NetAxis Solutions business by bringing advanced carrier-grade communications services to Service Providers and Corporations and by providing high-technology products to the industry. Manuel holds a Master in Electrical Engineering – Electronics and Physics, a Master on Medical Physics and Bioengineering, and an MBA in management.

Loads of posts on PBX fraud here. Also come back for a different VoIP fraud post each day this week.

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