Why telecom fraud regulation should target all market players


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

The first goal of cooperation between regulators and companies is to improve existing standards and procedures. Regulators also devote a significant portion of their efforts to solving problems and protecting business participants and end users by enacting new regulations.

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

Cybercrime is one of the most inventive and difficult crimes to combat. The difficulty of applying countermeasures stems from the fact that fraud methods and technologies continue to evolve and vary rapidly.

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

Below I will provide an overview of some of the key global initiatives being taken to provide better and faster responses to industry fraud and examine the fraud problem from different perspectives (end user, provider and regulator).

Telecom fraud and its consequences

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 proliferate, fraud crimes have become master strategies to steal money and personal identities, among other things.

Telecommunications fraud comes in many forms, but ultimately all schemes attempt to extort money from subscriber or telecom provider accounts. In any fraud, more than one party ends up getting hurt.

The first party to be harmed by fraud is the person using the telecom services. This person receives one wangiri call, a robocall or any other type of fake call. The prevalence of these types of scams frustrates subscribers.

Consumer dissatisfaction has led many people to stop answering their phones. This kind of behavior ultimately leads to a loss of revenue for the operator. Robocalls in particular brought a lot of attention to the problem of telecom fraud, prompting regulators to put it on their agenda.

To be clear, the types of fraud that cost the industry the most money are not robocalls. International revenue sharing fraud, which currently uses several methods causes the greatest financial loss to the telecom sector. This type of fraud includes schemes such as hacking private branch exchanges, wangiri and wangiri 2.0 (which target brands rather than individuals). In 2021, the telecom industry lost $6.69 billion to this type of fraud.

Regulation against telecom fraud

In the regulatory ecosystem, regulators and the initiatives they propose are primarily aimed at protecting the interests of consumers. Telecom providers rarely receive significant protection. Meanwhile, telecom companies bear the most challenging part of the fraud, including financial losses and reputational problems.

The United States leads the telecom 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 phone 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 telecom scams.

The regulation also only applies to operators based in the United States. However, many carriers add more modern solutions in addition to this standard that can defeat a wide variety of fraud types.

The US Federal Communications Commission has been looking for a solution to stop robocalls since 2014 and the requirement to use the STIR/SHAKEN protocols entered into force on June 30, 2021 for major telecom providers. This lapse of time between the problem and any proposed solution showed that all of us (telecom market participants, regulators and subscribers) are losing this game to scammers. By the time that standard was adopted, other more serious forms of fraud had emerged and better counter-solutions had been introduced.

In the UK a new one law will impose stricter obligations and higher fines on market parties. The law does not try to protect against fraud, but tightens up the regulations, enabling market participants to take fraud measures independently. The maximum penalty of the proposal is 10% of the company’s revenue, which can exceed 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 rules?

The global development of cybercrime has prompted governments to step up their work on legislative reforms, often committing more resources to combating such crimes. Most of the guidelines adopted globally in this debate are consumer-facing and focus on protecting subscribers’ rights.

But telecom fraud takes place within the telecommunications industry itself. This problem can only be solved through new market cooperation and new rules for all market participants. Combined with advanced technologies such as AI, ML and mathematical analysis, I believe this strategy can eliminate fraud completely.

Public education, spreading knowledge about how telecommunication scams work and presenting available alternatives to eliminate such fraud are effective methods of addressing this problem.

So far, the issue has been highlighted mainly from the user perspective, with telecommunications media in particular highlighting the impact shared by all market participants in this game. Providing a realistic picture of how complicated and innovative telecom fraud is can help form a new mindset about the problem and strategy to eliminate it through both technology and regulation.

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