Identity fraud in telecommunications

​​​Understanding identity fraud in telecom

Identity fraud in telecommunications, particularly subscription fraud, poses a significant threat to mobile network operators (MNOs). This type of fraud typically involves identity theft or the use of fake identities at the point of sale, allowing fraudsters to exploit telecom services or use them for further illegal activities. Unfortunately, as MNOs expand their offerings, the risk of subscription fraud increases. Once a fraudulent subscription is established, the criminal gains access to a wide array of services, including voice, TV, internet, and even new mobile financial services such as banking and payments. This scenario presents a daunting challenge for CFOs and heads of fraud departments as they strive to secure the numerous channels vulnerable to fraud.

How identity fraud happens

1. ID verification process

During the customer acquisition process, typically in an MNO’s retail store, customers are required to provide ID documents, utility bills, and bank account details. Identity verification is a critical step in the subscription process, often carried out manually by a sales assistant. However, manual Know Your Customer (KYC) checks are inefficient and resource-intensive. Failure to detect forged or stolen IDs during onboarding allows fraudsters to walk away with high-end, heavily subsidized smartphones, often without the fraud being detected for some time.

2. SIM swap fraud

SIM swap fraud is another prevalent issue, where scammers use fake IDs to gain control of a legitimate subscriber's SIM card. With this control, they can authenticate transactions with the real subscriber's bank, make online purchases, transfer money, and incur significant costs in the subscriber’s name. Manual, non-automated identity verification processes are ineffective, exposing MNOs to substantial fraud risk.

For example, in May 2019, a group of hackers stole $1 million by exploiting SIM swap fraud, using victims' phone numbers to access their Facebook and Instagram accounts. They altered personal information and passwords, gaining ongoing access. The FBI estimates that there are 600,000 attempts at SIM swap fraud annually, although only a fraction are reported. In 2021 alone, the FBI’s Internet Crime Complaint Center (IC3) received 1,611 SIM swap complaints, resulting in more than $68 million in losses.

Why strong identity verification is critical for MNOs

Effective identity verification is crucial in combating telecom fraud. MNOs face three major challenges.

1. Regulatory compliance

MNOs must adhere to stringent local and international regulations regarding identity verification. Many governments now mandate the registration of prepaid SIM cards with valid proof of identity, and as of 2022, 160 countries enforce SIM registration policies to address national security concerns. Compliance is especially critical as mobile financial services become increasingly important in MNO portfolios. Failure to comply can lead to fines and SIM card deactivations.​

​​​2. Financial impact of telecom fraud

Telecom fraud resulting from inadequate ID verification can go undetected for months, leading to substantial financial losses. These losses include the cost of subsidized handsets and the misuse of services like international calls, internet access, TV, and mobile financial services. Neural Technologies estimates the annual cost of identity fraud in the telecom industry at €40 billion. According to the Global CFCA Telecom Fraud report, identity fraud accounts for 35% to 40% of all telecom scams, potentially impacting up to 10% of an MNO’s bottom line.

3. Brand image and reputation

Beyond direct financial losses, identity fraud can severely damage an MNO's reputation. Poor user experiences resulting from fraud can lead to costly compensation, reissuing SIM cards, updating security systems, and addressing financial liabilities with banks. MNOs may also need to invest in extensive communication campaigns to restore trust with consumers, investors, and partners.

Choosing the right identity verification service

For operators and MVNOs, selecting an identity verification solution is a critical decision. Here are key factors to consider.

1. Comprehensive expertise
   Choose a provider with extensive experience in multiple areas beyond just facial biometrics. Telecom businesses need versatile solutions to protect their physical, mobile, and virtual ecosystems. A provider with combined expertise in document verification, identification, online authentication, advanced biometrics, and security is essential to avoid integration headaches.
2. Innovation capabilities 
   Opt for a provider who stays ahead of technological trends, offering the latest advancements without making you a guinea pig. Adopting cutting-edge technology early on can provide a competitive advantage.
3. Consultative approach 
   Look for a provider who acts as an advisor, not just a supplier. They should offer customized solutions tailored to your unique needs and provide insights on how these solutions will impact your business operations.
4. Diverse options 
   There is no one-size-fits-all solution in identity verification. Your provider should offer various options to create a tailored solution that meets your specific needs and can scale as your business evolves.
5. Budget-friendly solutions 
   A good provider offers services that fit your budget, including cloud-based, software-as-a-service (SaaS) solutions that can be written off as operating expenses rather than capital investments. This flexibility allows for a "pay as you go" model.
6. Proven experience
   Trustworthy providers will readily share customer experiences and references, offering insights into their industry expertise and service quality.
7. Secure and compliant environment 
   Ensure your provider can offer a highly secure environment that maintains the availability, integrity, and confidentiality of your identification solutions and data, in compliance with industry and government regulations.

Taking proactive steps to prevent identity fraud and demonstrating due diligence are crucial for the future of your business.

Thales Identity Verification Services

As a leading supplier of secure ID documents to governments, Thales has extensive experience in combating identity fraud. With over 15 mobile network operator references, we collaborate closely with identity fraud experts globally. Through numerous ID projects, including securing national borders, we have developed advanced expertise in detecting fake documents. Thales continuously monitors evolving fraud techniques and integrates the latest advancements into our identity and document verification services.

Our solutions feature automated, cutting-edge ID document and biometric checks, such as facial and voice matching with liveness detection, all performed in seconds. This allows our clients to focus on enhancing customer experience while maintaining security. We combine our knowledge of public and private sectors to help MNOs significantly reduce subscription fraud with identity verification services that meet government-grade security standards, comply with national regulations, and seamlessly integrate into existing systems. Our global capabilities allow for the deployment of platforms and services, whether as managed services or on-premises solutions.

Explore more on telecom fraud and identity verification solutions

• Biometric identity verification for TIM Brasil
• Digital identity verification service for a leading Asian operator
• Digital customer onboarding (white paper) 
• Facial liveness detection: AI, countermeasures, and certification
• Discover more about Thales Trusted Digital Identity
• ​Learn how Thales solutions help MNOs combat identity fraud​