Phone fraud

From ArticleWorld

The telephone or phone (Greek word tele = far away and phone = voice) is a telecommunications device which is used to transmit and receive sound (most commonly voice and speech) across distance. Most telephones operate through transmission of electric signals over a complex telephone network which allows almost any phone user to communicate with almost any other.

Whether in the form of the consumer attempting to defraud the telephone company, the telephone company attempting to defraud the consumer, or a third party attempting to defraud either of them, fraud has been a part of the telephone system almost from the beginning.

Frauds against users by phone companies:

• Cramming is the addition of charges to a subscriber's telephone bill for services which were neither ordered nor desired by the client, or for fees for calls or services that were not properly disclosed to the consumer. These charges are often assesed by dishonest third-party suppliers of data and communication service. • Slamming is any fraudulent, unauthorised change to the default long-distance carrier or DSL internet service selection for a subscriber's line, most often made by dishonest vendors desirous to steal business from competing service providers. Fraud against customers by third parties: • PBX dial through can be used fraudulently by placing a call to a business and then requesting to be transferred to "9-0" or some other outside toll number. (9 is normally an outside line and 0 then connects to the utility's operator) The call appears to originate from the business (instead of the original fraudulent caller) and appears on the company's phone bill. Trickery (such as impersonation of installers and telco personnel "testing the system") or bribery and collusion with dishonest employees inside the firm may be used to gain access.

Autodialers may be used for a number of dishonest purposes, including telemarketing fraud or even as War dialing. War dialers take their name from a scene in the early-1980's movie WarGames in which a 'cracker' programmes a home computer to dial every number in an exchange, searching for lines with auto-answer data modems. Sequential dialing is easy to detect, pseudo-random dialing is not. One more recent variant involves claiming to be a customer-owned coin-operated telephone (COCOT) vendor, connecting an autodialer to what should have been a payphone line, dialing an assorted series of toll-free "wrong numbers" (such as +1-800 in US, which effectively reverses the charges) and then demanding that the called parties reimburse the fraudulent COCOT provider for the cost of "calls received from a payphone".

Pre-pay telephone cards and "calling cards" are also very vulnerable to fraudulent use; these cards contain a number or passcode which can be dialed in order to bill worldwide toll calls to the card. Anyone who obtains the passcode can dishonestly misuse it to make or to resell toll calls.

Telemarketing fraud takes a number of forms; much like mail fraud, solicitations for the sale of goods or investments which are never delivered or worthless and requests for donations to bogus unregistered charities are not uncommon. Callers often prey upon sick and elderly persons; scams in which a caller attempts to obtain banking or credit card information also frequently occur. One other variant involves calling a number of business offices, asking for model numbers of various pieces of office equipment in use and then sending unsolicited shipments of supplies for the machines then billing the victims at artificially inflated prices.

Fraud by phone companies against one another:

• Interconnect fraud involves the falsification of records by telephone carriers in order to deliberately miscalculate the money owed by one telephone network to another. This affects calls originating on one network but carried by another at some point between source and destination. • Refiling is a form of interconnect fraud in which one carrier tampers with CID (caller-ID) or ANI data to falsify the number from which a call originated before handing the call off to a competitor. Refiling and interconnect fraud briefly made headlines in the aftermath of the Worldcom financial troubles; the refiling scheme is based on a quirk in the system by which telcos bill each other - two calls to the same place may incur different costs because of differing displayed origin. A common calculation of payments between telcos calculates the percentage of the total distance over which each telco has carried one call to determine division of toll revenues for that call; refiling distorts data required to make these calculations.

Fraud against the phone company by users:

• Subscription fraud: for example, signing up with a bogus name, or no intention to pay. Frauds against the phone company by third parties: • Phreaking involves obtaining knowledge of how the phone system operates and making use of that knowledge to place unauthorised calls; in some cases human engineering has been used to trick telco employees into releasing technical information. Early examples of phreaking involved generation of various control tones, such as a 2600 Hz blue box tone to release a long-distance trunk for immediate re-use or the red box tones which simulate coins being inserted into a payphone. • Payphones have also been misused to receive fraudulent collect calls; most no longer accept any incoming calls for this reason. • Cloning (telephony) has been used by dishonest analogue cellular phone users as a means of copying both the electronic serial number and the telephone number of another subscriber's 'phone to a second (cloned) 'phone. Airtime charges for outbound calls are then mis-billed to the victim's cellular 'phone account instead of the perpetrator's. Cordless phones are often even less secure than cellphones. There are a number of other privacy concerns with mobile and cordless 'phones; a scanner radio may intercept analogue conversations in progress.

According to Billing World magazine, as of 2004 "up to 10 percent of a carrier’s bottom line is lost to simple subscription fraud and other low-tech scams, such as when criminals sign up for service using fake names."