The Impact of AI on Telecoms Fraud Protection Strategies

Telecoms fraud is a prevalent and ever-evolving issue that affects both business and individual customers in the telecommunications industry. It encompasses a range of fraudulent and abusive activities that can cause significant financial damage to companies and individuals alike. Ranging from well-established methods, including PBX hacking and SIMBox bypass, to newly evolving threats, such as flash calls and mobile money fraud, the tactics used by cybercriminals and fraudsters are constantly changing.

Telecoms fraud is booming and costs the world $32.7 billion each year, per a joint report issued by Europol and Trend Micro. The consequences of telecoms fraud can be severe, resulting in not only financial damage but also damage to the brand reputation of telecoms companies. With the increasing use of artificial intelligence (AI) in fraud protection strategies, we set out to explore the impact of this technology on the fight against telecoms fraud.

Why Is Telecoms Fraud an Ongoing Problem?

Telecoms fraud has been an ongoing problem for many years, and unfortunately, it shows no signs of stopping. There are several reasons why this type of fraud persists, despite the best efforts of the security teams within telecoms operators.

First and foremost, the sheer size of the telecommunications industry makes it an attractive target for fraudsters. According to the GSMA, there are more than 5 billion mobile phone users worldwide, and this number is growing every day. Mobile phone users generally assign a high level of trust to their devices, which are regularly used to store security-critical information (banking PIN codes, for example), hold a unique repository of important contact details, and are generally central to an individual’s sense of identity. With so many potential victims trusting the mobile devices in their pockets, it's easy to see why fraudsters are drawn to telecoms, and as the digitization of commerce has intensified, this puts untold riches potentially within easy reach.

Telecoms fraud is often difficult to detect and prosecute. Fraudsters are becoming increasingly sophisticated, using advanced techniques to avoid detection. They typically use fake or stolen identities, exploit security vulnerabilities in telecom networks, or use sophisticated hacking tools to gain access to sensitive information.

Over a span of merely 15 months leading up to July 2022, China effectively countered a staggering 594,000 instances of telecommunications and online deceit, as per a report by Nikkei Asia citing the Ministry of Public Security.

Many people are unaware of the risks associated with telecoms fraud. They may not know how to spot suspicious activity or may be too trusting of phone calls or emails that seem legitimate. This lack of awareness makes it easy for fraudsters to target unsuspecting victims. At the same time, many telecoms fraud attacks happen without business customers knowing that fraudulent traffic has been injected into their telephony systems.

The global nature of telecom networks means that fraudsters can operate from anywhere in the world. This makes it difficult for law enforcement to track them down and bring them to justice. Telecoms fraud persists due to numerous victims, advanced fraudster techniques, public unawareness, and global networks, and it is unlikely to disappear soon despite the efforts of the industry and government organizations, so we must remain vigilant.

How Can AI Improve Protection Strategies?

Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think, learn and act like humans. The applications of AI are growing by the day, from customer service to public safety to healthcare and now, fraud detection and more. 

AI has the capability to analyze massive volumes of communication traffic during live operations. AI algorithms can learn and understand what constitutes a legitimate phone call, message, or data transmission and can flag those that appear suspicious. This enables telecom companies to identify and prevent fraud attempts in real-time, rather than relying on after-the-fact analysis, which surprisingly is still common today.

Furthermore, AI can be trained to understand what exceptions to expected communications traffic should be investigated as potential fraud. For example, if a business customer suddenly starts consuming more data than usual or making calls to international numbers during off hours, AI can flag these activities as potentially fraudulent and alert the telco's fraud management team.

This is a dramatic step forward compared to existing practices used by telcos and their fraud management teams, according to Gavin Stewart, Vice President at telecoms software provider Oculeus. “Traditionally, fraud detection relies on human analysis with the previous generation of anti-fraud technologies built on static rules that with time became easy for fraudsters to outwit.” Stewart also highlights that many cybercriminals are employing AI technologies themselves, and now, with the help of AI, telcos are in the position to rapidly “perform enormously complex evaluations of large historic data sets for training the AI models to detect even the most subtly-disguised fraud methods that would otherwise be missed by the older rules-based approach.” 

AI is poised to transform how telecommunications fraud is detected and prevented. By analyzing massive volumes of data in real-time, AI can identify anomalies, flag potential fraud, and either alert the telco's fraud management team or, according to policy, even apply automated controls to block or shut down fraudulent traffic streams in real time. This holds the potential to revolutionize the fight against telecommunications fraud and save millions of dollars every year lost to telecom fraud.

Benefits of AI in Telecoms Fraud Protection

AI has transformed telecoms by introducing systems that detect and prevent fraud in real time. Other benefits include:

• Cost-Effective Solution: Implementing an AI-powered fraud detection system is more cost-effective than manual detection methods. By automating fraud detection, telecom companies can save millions of dollars by reducing the need for manual intervention and allowing their resources to focus on other areas of the business.
• Real-Time Response: One of the biggest advantages of AI in fraud protection is its ability to respond in real time. With AI technology, fraudulent activities can be detected and blocked instantly, minimizing potential damage and preventing further loss.
• Enhanced Customer Experience: AI technology can help to improve the customer experience by reducing the impact of fraud on customers. AI also helps eliminate ‘false positives’ whereby the accounts of legitimate and blameless customers are erroneously blocked. With real-time fraud detection, telecom providers can increase customer trust and loyalty and reduce churn.

Final Thoughts

The impact of AI on telecom fraud protection strategies cannot be understated. With the increasing sophistication of fraudsters, telcos need to stay ahead of the curve to safeguard their customers and revenue. The use of AI not only automates fraud protection efforts but also ensures that fraudulent calls are identified and blocked before any financial damage is caused. It is, therefore, imperative that telcos continue to invest in AI-powered fraud protection solutions to enhance their operational efficiency and improve their customers' experience. The future is bright, and with AI, telecoms fraud protection is set to reach new heights.