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July 2016

Calculating the Fraud Risks of the Digital Era

Calculating the Fraud Risks of the Digital Era

Could you live without your mobile device?  In 2016, admitting that you can’t is hardly a cause for shame.

Used continually for navigation, mobile purchases, downloading video, browsing news sites, exchanging WhatsApp messages — and even the occasional phone call — our devices are now part of us.  And this use extends to storing sensitive information such as personal contacts, business and private emails, social media profiles, personal videos and photos, and so on.

What’s more, all major over-the-top (OTT) providers are competing with each other to sell us an array of storage solutions, such as Google Cloud Storage, Microsoft Azure and Amazon Web Services, to further encourage us to store almost every aspect of our lives on our mobile devices.

But there is another, sinister side to this revolution.  Accompanying the upside are many new threats and risks — both known and unknown.  And as digital technology continues to evolve at a frantic rate, keeping pace with the increased risks presents an enormous challenge.

Cyber Security Vulnerabilities are Turning into Fraud Enablers

To understand how the technology is fast being exploited for illicit gain, let’s look at Account Take Over (ATO) fraud, which while having been around for years, is now taking on a new life, thanks to digital technology.

ATO fraud occurs when a fraudster, posing as a genuine customer, succeeds in gaining control of a mobile user’s account and performs unauthorized transactions with their service provider (for example, switching SIM cards, posing as the user to order services and goods and so on).

In the past, most breaches were attributed to socially engineering1, where users would unwittingly provide sensitive data to fraudsters — in email messages and the like — to obtain private information and credentials.

But today, fraudsters have evolved.  They no longer need to directly solicit our information.  Instead they purchase private information such as credit card details from the darknet or “underground Internet” for as little as $15.

The spread of mobile malware2 is another modern-day example of ATO fraud.  Since mobile users are generally unaware of what constitutes a risk, it’s fairly easy for an attacker to infect a device.  Since we are constantly being pushed information from a variety of sources (messages, links, social media info, etc.), sometimes our curiosity is stronger than our sense of caution, and the mobile users clicks an illicit hyperlink.

Once a device is infected, the attacker gains free access to control the device from any location without the owner’s knowledge.  They can generally access all information on the device, including passwords, which the attacker can then use to launch a take-over attack of the user’s financial accounts.  The attacker may also operate other device features, such as the camera and video recorder, to capture even more sensitive information and in the most intimate of situations.

The problem is caused by the failure of mobile users to appreciate their devices for what they effectively are — powerful computers — and to protect them accordingly.  Even traditional security-related threats, such as phishing, viruses and Trojan horses, which are typically associated with PCs and larger IT systems, remain equally applicable to mobiles.  While some of these risks can be mitigated by downloading one of the many free mobile apps from major security vendors, ignorance of the risks means users often don’t take advantage of these apps to ensure even the most basic level of security.

As a result, we can now understand how the worlds of cyber security and fraud are merging into one, where any security breach can potentially serve as a fraud enabler.  And while most of these threats are not new, they are becoming increasingly apparent as the world becomes more digital.

The Future: a World of Cyber Anarchy?

While the impact of fraud on the individual is clear, there is also a wider issue at stake: the effect on larger organizations, institutions and governments.  Today, the need to adapt to the digital world has become almost universal.  On one hand, this is due to considerations such as improving customer experience, efficiency and reducing operational costs.  And at the same time, Internet of Things (IoT) technology has become an enabler to expand digital capabilities into new, more industrial spheres.  The result is they can gain the ability to remotely manage large operations conveniently and accurately, over wide geographical areas in the fields of transportation, agriculture, communication, construction, utilities and more.

But accompanying the benefits are huge security risks — far greater than has been the case until now.  That is why for these organizations, the enthusiasm to embrace the potential benefits of the digital world is often tempered by the inherent complexities and dangers.  Complicating matters, while they know they must approach digital transformation in a manner that is rational and responsible, in some cases, they do not know how to even start doing so.

There’s good reason for such caution.  Imagine the implications of a successful cyber-attack on a smart grid belonging to a national utility company or transportation infrastructure such as SIM-equipped traffic lights.  Worse still, consider the implications of a cyber-attack on one of the more than 1,100 operational satellites that provide communication services to populations worldwide.  The result would cause chaos and almost certain loss of life.

Awareness is Key

To combat the increasing threat of cyber-fraud, awareness and smart strategies are key.

As individuals, we need to be constantly aware of potential cyber-attacks that can cause us damage, either financially, privacy-related, or otherwise.  As such, we must ensure that we act responsibly when it comes to our “digital behavior”.  This includes installing security apps on our smart devices, only opening media that originates from trusted parties and staying aware of potential phishing attempts.

For commercial entities and national institutions whose mission is to provide greater virtualization and digitalization, expert advisory services need to be a part of the transformation process.  Only such an approach will ensure that risks are minimized and systems are adequately secured to protect both the organization and its customers.

As vendors, we are at the forefront of the battle.  Fighting it requires an intelligent mix of cyber-security, traditional fraud methodologies and domain expertise.  We must continuously develop new detection and prevention techniques that enabling organizations to respond in real time to any security breach.  At Amdocs, we are playing our part by employing advanced and sophisticated real-time correlation techniques, as well as powerful machine-learning capabilities to create solutions that can proactively predict and prevent the next fraud event.

    NOTES:

    1 Social engineering is an attack vector that relies heavily on human interaction and often involves tricking people into breaking normal security procedures.

    2 Mobile malware is designed specifically to target a mobile device system, such as a tablet or smartphone to damage or disrupt the device.  Most mobile malware tries to disable a mobile device, allow a malicious user to remotely control the device, and/or steal personal information stored on the device.


Copyright 2016 Black Swan Telecom Journal

 

About the Expert

Dror Eshet

Dror Eshet

Mr. Dror Eshet is a leading expert in telecom fraud with more than 15 years of experience in fraud detection and prevention at various large enterprises.

Mr. Eshet joined cVidya in 2008 as its global fraud prevention consultant.  In 2012, he was promoted and became the company’s FraudView product manager.  In this capacity, he was responsible for the company’s flagship FraudView product suite.

In January 2016, cVidya was acquired by Amdocs, a leading provider of customer experience, OSS/BSS solutions for telecom and since then, Mr. Eshet serves as the fraud solutions product manager in Amdocs’s Revenue Guard practice.

During 2007 and 2008, Mr. Eshet took on the role of fraud prevention manager at MIRS Communications Ltd., a provider of cellular communication services (currently part of HOT Telecommunication Systems Ltd. (TASE:HOT), a leading provider of cable television, Internet, broadband and telecom services in Israel).

Before joining MIRS, Mr. Eshet served nine years as a fraud prevention manager at Bezeq International  a part of Bezeq (TASE: BEZQ), Israel’s largest and leading telecom group, offering full range of telecom services.

Mr.  Eshet holds a BA in Business Administration.   Contact Dror via

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  • Roaming Fraud: The Importance of Real-Time Data Exchange and Analysis interview with James Stewart — The Near Real Time Roaming Data Exchange (NRTRDE) is a GSM standard allowing operators to gain fast access to the roaming records of service providers half way around the world.  The article explains how 65 carriers are using this data to combat fraud through a service bureau.  Learn about the dangers of international roaming fraud and the value a roaming service bureau brings to the table.
  • Is the M2M Device in Your Refrigerator a Telecom Fraud Threat? interview with Simon Collins — Machine to machine (M2M) technology is being applied in hundreds of monitoring apps, such as smart metering and health diagnosis.  It’s even being used to monitor driving patterns tied to auto insurance rates.  But this article shows the serious M2M fraud and security threat that stem from the theft of the SIM/USIM device used in every M2M device.  The article discusses the RA and fraud strategies operators need to employ to manage the risks that will come from wider M2M deployments.
  • “Fraud Is a Wind that Always Blows” and Other Wisdom From a 28-Year Old Software Firm interview with Gary Beck — Here’s the amazing story of how Beck Computers was pulled out of a Tier 1 account only to be brought back in a few months later.  The article explores software vendor service and support challenges, real-time computing requirements, advanced fraud management functions, and ways to educate management on the value an FMS investment.
  • Insider Fraud: Detecting Criminal Activity in the Telecom Sales Process interview with Tal Eisner — One of the biggest problems telecoms now face is fraud done inside their offices, dealer stores and firewalls.  This type of fraud is especially dangerous because it’s performed by people fully authorized to transact for the company.  The story dicusses the major causes of insider fraud, presents a case study, and explains basic techniques that software uses to detect insider fraud.
  • Fraud & Credit Risk Software: Setting the Client Free to Innovate interview with Luke Taylor — Not every operator wants the freedom to configure its own fraud management solution, but certain providers wouldn‘t live without such a “framework” approach .  This article discusses: the reasons why operator choose this strategy as it covers many other fraud and credit software implementation issues.
  • Why Selling to Business Customers Makes You a High Risk Target for Fraud by David West — There’s a saying in the fraud business: “It’s not a question of whether you’ll be hit by fraud — only when, how bad, and from which direction.“  Citing four recent cases where operators were hit by fraud, this article explains why investing in a fraud soluiont — and keeping up-to-date — are so critical.  The article gives several examples of vulnerability points that fraudsters commonly exploit.