Understanding and Preventing Fraud

The intent of telecom fraud is to gain access to a long-distance carrier’s network by using your connection. After a fraudulent company is on the inside, it sells minutes to people at a discounted rate. The scenario is generally a call-sell operation. In this scenario, anyone on the street can pay $20 to call anywhere in the world for as long as they want. Because the person giving access to the call isn’t paying for it, any money received is pure profit. There are many types of telecom fraud that can affect your business, but two varieties are more common and more costly than all the others.

 Warning!  Fraud is a concern in all aspects of life, but in the realm of telecom, a single episode can quickly cost you tens — or hundreds of thousands of dollars. No joke! The worst aspect of fraud is that even if nobody in your company made the illegal calls, you still have a legal obligation to pay for them. When you alert your carrier to the fact that your phone system or calling cards have been compromised, the carrier can help you identify and stop the current breach, but it has no obligation to credit you any money for the calls you claim are fraudulent. Any financial leniency you are given by a carrier is a professional courtesy unless your carrier has offered fraud protection within your contract for service. Always check your phone bill for international calls, because they are the largest targets for people committing fraud. Finding international calls to countries you can’t find on a map at hours you are not even open for business is a huge red flag.

Stopping PBX hacks

As you read this, people all over the world are dialing toll-free numbers with their computers. When the toll-free number connects to a phone system, it begins hacking around to see whether it can access an outside line. If it can access an outside line, the computer then makes a test call to an international phone number. If the call completes fine, the series of codes and prompts used to access the outside line is recorded and sold on the streets by garden-variety thieves and organized criminals. This process of connecting into your phone system by way of a toll-free number and then dialing out is called PBX hacking.

 Tip  The first thing to do to prevent your PBX system from being hacked is to eliminate your phone system’s ability to reoriginate dial tone. That is, you want to prevent a scenario in which you receive an inbound toll-free call that can seize an outside line and receive dial tone. Obviously, accepting incoming calls is fine, but you don’t want an inbound call to find its way to a dial tone.

If it’s impossible to dial out of your system after a toll-free number accesses the system, you’re in pretty good shape. Before the widespread use of cell-phones, re-originating dial tone from a phone system was a great feature used by sales staff while on the road. They could use a special company 800 number to call in for messages, and then press a code to dial out and return their calls — all without having to rack up expensive long-distance charges. But nowadays you have better options, such as using company-distributed mobile phones.

 Tip  I strongly advise that you hunt down the toll-free dial tone reorigination option in your phone system and disable it. If you absolutely must keep it, at least have your phone system block international calls. The real money in telecom fraud is when you can sell minutes to locations that are expensive to call. Nobody is going to pay you $20 to talk to Mom in South Carolina, where the rate is usually about 7 cents a minute. The real market for telecom fraud is for people who want to call friends, relatives, and business associates in Afghanistan or the Kuala Lumpur, where the cost may be $2 per minute.

Cracking down on calling card fraud

Calling cards are being used less and less because mobile phones are now widely available at a low cost. However, calling cards are still a major source of fraud. The calling cards I am talking about are not the prepaid calling cards that you buy at the convenience store when you are traveling; I am speaking about the calling cards you receive from your local or long-distance carrier. Prepaid calling cards are set up to only allow a fixed amount of usage before they are disabled, so there isn’t much fraud exposure with them. For example, if you use a prepaid card to make a call in a phone booth and you accidentally leave the card in the booth, you lose the amount of money left on the card — no more, no less.

The calling cards that you receive from your long-distance carrier, on the other hand, have a preset limit based on a daily balance, weekly balance, or monthly balance. If the credit limit is set at $100 per day, you have a potential $3,000 exposure per month on that card if the wrong person gets his or her hands onto it. Most people do not use their calling cards very often and you may not notice that the card has been compromised until two months later when your carrier generates an invoice and mails it to you.

Calling cards used for fraud are acquired in many ways. The most common way that calling card information is gathered is at airports with a little trick called shoulder surfing. Shoulder surfing is a technique whereby someone looks over your shoulder at a pay phone and makes note of the toll-free access number for your calling card platform and your PIN number. The person watching you may be in the next phone booth over or on an observation deck with a pair of binoculars, calling off the numbers to a partner who writes them down. Some criminals are more ingenious and place tape recorders under pay phones to record the sound of the digits you dial, and disreputable hotel staff may record the same information as you call from your room and it is processed through the hotel phone system. Regardless of how the information is gathered, your card information is then either sold on the street until your card’s limit is hit or it is used by career criminals to cover their tracks and make phone calls to people they do not want to be linked to.

This fraudulent activity can add up to be quite a bit of money rather quickly. Here are some steps you can take to protect yourself from calling card fraud:

• Call your carrier and find out the credit limit and term on your calling card. Is it a set amount per day, week, or month?

• Have the limit set at $50 per month. Most people with calling cards make between $15 and $25 in calls per month, so this $50 shouldn’t leave you stuck without any minutes when you need them most.

• Figure out how to quickly raise the credit limit on your calling card in the event of an emergency. The moment you need to raise the limit on your card will probably be a stressful one, so you should know your expectation level before you have to make the call. If you are at the hospital because your wife is having a baby, or someone was in an accident and you need to call people from the lobby phone, you will need the limit raised in a very short amount of time and as painlessly as possible.

 Warning!  Calls from your calling cards are charged a higher per-minute rate than calls from your home or office. In fact, the rates you’re charged may be two or three times what you would pay if you call the same place from your office. Check your rates before you go on that long trip to avoid an unpleasant surprise when you get your next invoice.