June 2015

Mapping the Interconnect Resale Routes of Fraudsters: How a Global Robot Network Detects Voice and SMS Bypass

interview with Xavier Lesage

A few years back, the term “bypass fraud” was practically synonymous with voice fraud via the SIM box.

But the march of network, software, and mobile technology has brought new stealth tools and fresh avenues to deliver bypass fraud. The effect has been to open the bypass floodgates for fraudsters.

In the SIM box area alone, human behavioral simulation tools have made it devilishly hard to detect bypass SIM boxes via CDR analysis alone. And SIM Servers are automating multi-national bypass operations by rotating cards from a central bank of SIM cards located halfway around the world from the infected country.

What’s more, bypass is spreading to SMS and is finding avenues through ghost trunks and OTT apps on the smartphone.

One company at the forefront of helping operators deal with the bypass challenge is Araxxe, a managed services firm and an expert in using robotic test call systems to detect revenue assurance and fraud problems.

We are now joined by Xavier Lesage, CEO of Arraxe, who gives us a colorful snapshot of this fast evolving bypass scene. He not only explains the strategy of the fraudster, but also provides some illuminating case studies to make his points.

	Dan Baker: Xavier, pleased to have you here on Black Swan again. In our last discussion, you explained how useful robots are on the revenue assurance side. This time we’ll talk about their power in fraud management. To begin, it would be great to get a quick overview of the Araxxe business.

Xavier Lesage: Certainly, Dan. We have about 250 test call robots deployed in 150 countries, and these robots are connected to about 1,750 interconnect routes. So this is a unique source of intelligence on retail and wholesale routes.

And we use this network for two service lines. The first is in revenue recognition for revenue assurance, billing, and for checking engineering codes, SMS, and making sure they are properly billed to the subscriber.

And our second service line is to make sure voice and SMS are properly routed according to the agreements between carriers. And it’s using this service line where we detect SIM box fraud bypass and plenty of other types of fraud.

	Why do we have these bypass problems in the first place? What’s the root cause?

Well the simple answer is that bypass occurs when there’s sufficient margin to make arbitrage attractive. But that arbitrage opportunity is caused by three pressures that all operators face as they do business:

Value Based Pricing Pressure — To optimize their use of expensive networks, operators are forced to set higher prices for one set of customers to offset the lower fees they get from others. So this causes marketing people to create so-called “hideously complex” offers aimed at very specific segments of their market. Maybe they create a low cost offer for students and a more expensive, feature-rich plan for business customers. So the higher rate to businesses opens the door to arbitrage.
Regulatory Pressure — Regulators write interconnect laws that control the price or require higher taxes be paid to particular destinations such as all inbound calls to the country.
Competitive Pressure — To gain an edge over competitors, operator will sometimes create highly attractive promotional offers that can be exploited by fraudsters. For example, to attract more traffic from pilgrims and migrant workers, a Middle East operator offers an attractive wholesale rate for all calls originating in Saudi Arabia. The discrepancy between the standard rate and the rate applicable to traffic originating in Saudi Arabia is detected by fraudsters and they will immediately “dress” their voice traffic landing in the said Middle East country by replacing the Calling Line Identifier with a dummy number starting in +966 for Saudi Arabia — and so the traffic will enjoy the discounted rate wherever it comes from! In our jargon, we call that “CLI Refiling”.

So fraudsters basically take advantage of this complexity. Now the simplest example is where the interconnect fee is 10 cents for international inbound calls and only 1 cent for in-country retail calls. Well, a price gap like that makes SIM box bypass very attractive. So a fraudster can go to the international market and as long as they don’t ask questions about how the interconnect traffic is terminated, they can make a profit selling for 5 cents a minute.

That’s the original idea behind the SIM box, but it’s really the simplest bypass scheme. There are many other bypass frauds out there involving SMS, ghost trunks, and OTTs.

	At first glance, finding the interconnect paths seems like an impossible task given the number of interconnect routes available to the fraudsters. How does Araxxe gain some leverage in the detection process?

It’s true, the routes are many, the fraudsters are highly intelligent, and they are careful to hide their tracks, but there’s one fundamental weakness that we can exploit to our advantage, and that’s the fraudster’s need to resell.

Let’s say you, as a fraudster, have developed a perfect way to terminate to one network in let’s say, Egypt. And you terminate at a very attractive price — maybe 2 cents instead of the 10 cents, which is the legal termination rate.

So how does a fraudster exploit this opportunity? Well, when you think about it, a fraudster’s captive network of interconnect routes is probably very limited, so he’s hungry for distribution. His dilemma is like the genius who builds a fantastic mousetrap but struggles to get the publicity and distribution channels to sell to customers.

In other words, being a successful SIM box fraudster requires more than a purely technical capability. The fraudster must be also be well-organized, have contacts, and know how to resell its routes to interconnect carriers, retail carriers, and calling card carriers. In short, they are eager to resell to any channel that can drive profitable traffic to its SIM Box operation.

So this is where Araxxe come in. We know that no matter what a fraudster does, their game is to resell. And because of our wide footprint of robots, we are constantly making calls onto wholesale and retail routes. And if there’s suddenly a very attractive offer in a particular market, we will buy that top up card or subscribe to this offer ourselves and use our robots to demonstrate how, for example, 20 different grey routes are reaching each network.

	You mentioned “ghost trunks” as yet another form of bypass. What is that exactly?

Well, because we detect SIM box bypass very fast, the fraudsters constantly seek other ways to terminate.

One of those is the ghost trunk, basically an internal interconnect link for sending traffic to a network that’s completely hidden from billing. It will be declared as an internal trunk within the operator so nobody will bill off it, but it’s really a backdoor for fraud.

If you use a fraud management system and look at the CDRs of subscribers, you will never detect ghost trunks, because the usage is not recorded within the usage of subscribers. This is why ghost trunks are invisible to the billing and fraud management team.

Ghost trunks highlight the importance of complementary bypass detection solutions.

In particular, fraud management systems (FMS) and test call generation (TCG) teams need to coordinate with each other. It’s essential to have as wide a view of bypass activity as possible. Some things are seen by an FMS, but not by TCGs — and vice versa. This is the reason why when we work for a mobile operator we often spend a lot of time integrating with their existing FMS to understand how they work to refine it. We also study fraudulent SIM card lifecycle to focus detection and reach the near real-time detection needed by our clients to protect their wholesale revenues.

	What do you consider your detection strengths, Xavier? And what are some of the challenges you face?

Well, certainly our network of 1,750 interconnect routes is our first strength. A point to highlight: more than 50% of our routes are calling cards and voice over IP routes. This is crucial because those grey routes have higher infection rates and enable a far quicker detection than with standard GSM routes that also work but are slower to detect the same fraudulent numbers.

And I would say our second key strength is our ability to design algorithms that are efficient. Let’s imagine you have a perfect network of robots and routes that you are investigating. The question then becomes: how do I best use those routes to solve the problems of our clients?

The challenge to achieving that goal is you must reconcile two opposing strategies. On the one hand, to detect SIM boxes very fast you need to make lots of calls. But at the same time, you need to limit your number of calls to avoid being detected by the fraudsters.

So to get around this dilemma, we have developed some algorithms we are extremely proud of. The idea is to constantly adapt the intensity of our probing depending on the situation in the network.

For example, we work in many Muslim countries. And many of the people who live in those countries immigrate to other countries and return back home during Ramadan. So we design specific call campaigns for the Ramadan period to ensure that we detect plenty of SIM boxes just at the time that the networks are at peak traffic. This capability is very important to our clients in the Middle East and North Africa.

Likewise, in Latin America, Mother’s Day in May is a huge celebration. So there are plenty of calls being made at this time. Once again, we designed some specific campaigns at these times to raise the protection for our clients. So it’s an adaptive thing.

	With your network of robots, it may be possible to detect patterns that would lead you to the actual fraudsters themselves.

Dan, I am friendly with a exec at a Middle-East operator who once told me that his experience with SIM box and bypass fraud is that one should not try to find who is responsible for the fraud because it often leads to terrorism, money laundering or the army.

I think this advice is wise. Detection needs to be completely on the technical level. So we never look at who is responsible for what. We are not the police: we are a vendor who helps our clients make more money. We are there to efficiently protect their network, not to save the world.

Strange things happen in this SIM box world. When we work in the Caribbean, we detect a lot of bypass where the SIM boxes are located in Venezuela. Now this is very odd because the operator needs to initiate an international outbound call from Venezuela to the Caribbean country, so it’s expensive.

In fact, we found the fraudster was actually operating at a loss. They were selling something on the international market for 10 cents knowing full well that it costs them 20 cents.

It doesn’t make sense until you understand the motive. The SIM box scheme was being used to get money out of Venezuela to bypass exchange controls: fraudsters were paid in dollars outside Venezuela but were spending in Venezuela’s Bolivar currency. So this was a highly unusual case.

	Though most of your fraud control business is detecting bypass in nations of the developing world, I understand you recently discovered a bypass operation in France and another by a well known on-line taxi company.

People believe there’s no bypass fraud in France. They say, there used to be SIM box fraud in Europe, but it’s been cured. Termination fees in Europe used to be high, but now that they are low, no SIM Box fraud is occurring. That’s conventional thinking.

However, I can tell you that only last month we detected a fraudster with 1,000 SIM cards it used to send SMS. The scheme works on the same principle as it does for voice.

Now 1,000 SIM card is a pretty substantial operation. More than 500 SMS were sent by each SIM card per day. International SMS often leads to an interconnect charge of 5 euro cents. We calculated that the average loss to the operator was above 1 million euros of net loss per year..

There are a growing number of fraud schemes in SMS. For instance, you are no doubt familiar with Uber, the international taxi and private vehicle renting service. It’s a big commercial success and a wonderful company.

Uber also sends a lot of SMS. When you order a taxi from Uber, they notify you via SMS. And the SMS will tell you when your taxi has arrived. So Uber has millions of SMSs to send to people in France, Germany, Italy and the UK. The legitimate market price for terminating SMS for application-to-person is between 2 and 5 cents per SMS in Europe. To bypass these SMS termination fees, Uber notification SMSs transit through international SIM Box equipped with SIM cards from UK mobile operators — so they foot the bill!

There are a lot of wholesale operators, say in Argentina, who will negotiate an SMS agreement with a big name like Facebook because they are proud to sign an agreement with a famous company. But, in fact, these agreements are often used by other people to bypass the termination of marketing messages. So they make money by reselling termination SMS to a given network.

So you see, there are all sorts of schemes for using the telecom network without paying for it.

	Xavier, thanks for this excellent briefing. The case studies you cite are fascinating, and your comments have certainly broadened our outlook on bypass fraud.

Xavier Lesage

Xavier Lesage is president of Araxxe, a managed services firm that uses robotic test call systems to detect revenue assurance and fraud issues.

Prior to joining Araxxe in 2005, Xavier managed major revenue assurance and billing programs at Accenture for telecom clients such as Orange, Vodafone, Telecom Italia, AT&T and Liberty Global. Contact Xavier via

Black Swan Solution Guides & Papers

Expanding the Scope of Revenue Assurance Beyond Switch-to-Bill’s Vision — Araxxe — How Araxxe’s end-to-end revenue assurance complements switch-to-bill RA through telescope RA (external and partner data) and microscope RA (high-definition analysis of complex services like bundling and digital services).
Lanck Telecom FMS: Voice Fraud Management as a Network Service on Demand — Lanck Telecom — A Guide to a new and unique on-demand network service enabling fraud-risky international voice traffic to be monitored (and either alerted or blocked) as that traffic is routed through a wholesaler on its way to its final destinations.
SHAKEN / STIR Calling Number Verification & Fraud Alerting — iconectiv — SHAKEN/STIR is the telecom industry’s first step toward reviving trust in business telephony — and has recently launched in the U.S. market. This Solution Guide features commentary from technology leaders at iconetiv, a firm heavily involved in the development of SHAKEN.
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The Value of an Authoritative Database of Global Telephone Numbers — iconectiv — Learn about an authoritative database of allocated numbers and special number ranges in every country of the world. The expert explains how this database adds value to any FMS or fraud analyst team.
The IPRN Database and its Use in IRSF & Wangiri Fraud Control — Yates Fraud Consulting — The IPRN Database is a powerful new tool for helping control IRSF and Wangiri frauds. The pioneer of the category explains the value and use of the IPRN Database in this 14-page Black Swan Solution Guide.
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How Regulators can Lead the Fight Against International Bypass Fraud — LATRO Services — As a regulator in a country infected by SIM box fraud, what can you do to improve the situation? A white paper explains the steps you can and should you take — at the national government level — to better protect your country’s tax revenue, quality of communications, and national infrastructure.
Telecom Identity Fraud 2020: A 36-Expert Analysis Report from TRI — TRI — TRI releases a new research report on telecom identity fraud and security. Black Swan readers can download a free Executive Summary of the Report.
The 2021 State of Communications-Related Fraud, Identity Theft & Consumer Protection in the USA — iconectiv — This 49-page free Report on communications-related fraud analyzes the FTC’s annual Sentinel consumer fraud statistics and provides a sweeping view of trends and problem areas. It also gives a cross-industry view of the practices and systems that enable fraud control, identity verification, and security in our “zero trust” digital world.

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Are Cloud-Based Call Centers the Next Hot Product for the SMB Market? — interview with Doron Dovrat — Quality customer service can improve a company’s corporate identity and drive business growth. But many SMBs are priced out of acquiring modern call center technology. This article explains the benefits of affordable and flexible cloud-based call centers.
Flexing the OSS & Network to Support the Digital Ecosystem — interview with Ken Dilbeck — The need for telecoms to support a broader digital ecosystem requires an enormous change to OSS infrastructures and the way networks are being managed. This interview sheds light on these challenges.
Crossing the Rubicon: Is it Time for Tier Ones to Move to a Real-Time Analytics BSS? — interview with Andy Tiller — Will tier one operators continue to maintain their quilt works of legacy and adjunct platforms — or will they radically transform their BSS architecture into a new system designed to address the new telecom era? An advocate for radical transformation discusses: real-time analytics, billing for enterprises, partnering mashups, and on-going transformation work at Telenor.
Paradigm Shift in OSS Software: Network Topology Views via Enterprise-Search — interview with Benedict Enweani — Enterprise-search is a wildly successful technology on the web, yet its influence has not yet rippled to the IT main stream. But now a large Middle Eastern operator has deployed a major service assurance application using enterprise-search. The interview discusses this multi-dimensional topology solution and compares it to traditional network inventory.
The Multi-Vendor MPLS: Enabling Tier 2 and 3 Telecoms to Offer World-Class Networks to SMBs — interview with Prabhu Ramachandran — MPLS is a networking technology that has caught fire in the last decade. Yet the complexity of MPLS has relegated to being mostly a large carrier solution. Now a developer of a multi-vendor MPLS solutions explains why the next wave of MPLS adoption will come from tier 2/3 carriers supporting SMB customers.
Enabling Telecoms & Utilities to Adapt to the Winds of Business Change — interview with Kirill Rechter — Billing is in the midst of momentous change. Its value is no longer just around delivering multi-play services or sophisticated rating. In this article you’ll learn how a billing/CRM supplier has adapted to the times by offering deeper value around the larger business issues of its telecom and utility clients.
Driving Customer Care Results & Cost Savings from Big Data Facts — interview with Brian Jurutka — Mobile broadband and today’s dizzying array of app and network technology present a big challenge to customer care. In fact, care agents have a hard time staying one step ahead of customers who call to report problems. But network analytics comes to the rescue with advanced mobile handset troubleshooting and an ability to put greater intelligence at the fingertips of highly trained reps.
Hadoop and M2M Meet Device and Network Management Systems — interview with Eric Wegner — Telecom big-data in networks is more than customer experience managment: it’s also about M2M plus network and element management systems. This interview discusses the explosion in machine-to-machine devices, the virtues and drawbacks of Hadoop, and the network impact of shrink-wrapped search.
The Data Center & Cloud Infrastructure Boom: Is Your Sales/Engineering Team Equipped to Win? — by Dan Baker — The build-out of enterprise clouds and data centers is a golden opportunity for systems integrators, carriers, and cloud providers. But the firms who win this business will have sales and engineering teams who can drive an effective and streamlined requirements-to-design-to-order process. This white paper points to a solution — a collaborative solution designs system — and explains 8 key capabilities of an ideal platform.
Big Data: Is it Ready for Prime Time in Customer Experience Management? — interview with Thomas Sutter — Customer experience management is one of the most challenging of OSS domains and some suppliers are touting “big data” solutions as the silver bullet for CEM upgrades and consolidation. This interview challenges the readiness of big data soluions to tackle OSS issues and deliver the cost savings. The article also provides advice on managing technology risks, software vendor partnering, and the strategies of different OSS suppliers.
Calculated Risk: The Race to Deliver the Next Generation of LTE Service Management — interview with Edoardo Rizzi — LTE and the emerging heterogeneous networks are likely to shake up the service management and customer experience management worlds. Learn about the many new network management challenges LTE presents, and how a small OSS software firm aims to beat the big established players to market with a bold new technology and strategy.
Decom Dilemma: Why Tearing Down Networks is Often Harder than Deploying Them — interview with Dan Hays — For every new 4G LTE and IP-based infrastructure deployed, there typically a legacy network that’s been rendered obsolete and needs to be decommissioned. This article takes you through the many complexities of network decom, such as facilities planning, site lease terminations, green-safe equipment disposal, and tax relief programs.
Migration Success or Migraine Headache: Why Upfront Planning is Key to Network Decom — interview with Ron Angner — Shutting down old networks and migrating customers to new ones is among the most challenging activities a network operators does today. This article provides advice on the many network issues surrounding migration and decommissioning. Topics discussed include inventory reconciliation, LEC/CLEC coordination, and protection of customers in the midst of projects that require great program management skills.
Navigating the Telecom Solutions Wilderness: Advice from Some Veteran Mountaineers — interview with Al Brisard — Telecom solutions vendors struggle mightily to position their solutions and figure out what to offer next in a market where there’s considerable product and service crossover. In this article, a veteran order management specialist firm lays out its strategy for mixing deep-bench functional expertise with process consulting, analytics, and custom API development.
Will Telecoms Sink Under the Weight of their Bloated and Out-of-Control Product Stacks? — interview with Simon Muderack — Telecoms pay daily for their lack of product integration as they constantly reinvent product wheels, lose customer intelligence, and waste time/money. This article makes the case of an enterprise product catalog. Drawing on central catalog cases at a few Tier 1 operators, the article explains the benefits: reducing billing and provisioning costs, promoting product reuse, and smoothing operations.
Virtual Operator Life: Enabling Multi-Level Resellers Through an Active Product Catalog — interview with Rob Hill — The value of product distribution via virtual operators is immense. They enable a carrier to sell to markets it cannot profitably serve directly. Yet the need for greater reseller flexibility in the bundling and pricing of increasingly complex IP and cloud services is now a major channel barrier. This article explains what’s behind an innovative product catalog solution that doubles as a service creation environment for resellers in multiple tiers.
Telecom Blocking & Tackling: Executing the Fundamentals of the Order-to-Bill Process — interview with Ron Angner — Just as football teams need to be good at the basics of blocking and tackling, telecoms need to excel at their own fundamental skillset: the order-to-cash process. In this article, a leading consulting firm explains its methodology for taking operators on the path towards order-to-cash excellence. Issues discussed include: provisioning intervals; standardization and simplicity; the transition from legacy to improved process; and the major role that industry metrics play.
Wireline Act IV, Scene II: Packaging Network & SaaS Services Together to Serve SMBs — by John Frame — As revenue from telephony services has steadily declined, fixed network operators have scrambled to support VoIP, enhanced IP services, and now cloud applications. This shift has also brought challenges to the provisioning software vendors who support the operators. In this interview, a leading supplier explains how it’s transforming from plain ol‘ OSS software provider to packager of on-net and SaaS solutions from an array of third party cloud providers.
Telecom Merger Juggling Act: How to Convert the Back Office and Keep Customers and Investors Happy at the Same Time — interview with Curtis Mills — Billing and OSS conversions as the result of a merger are a risky activity as evidenced by famous cases at Fairpoint and Hawaiian Telcom. This article offers advice on how to head off problems by monitoring key operations checkpoints, asking the right questions, and leading with a proven conversion methodology.
Is Order Management a Provisioning System or Your Best Salesperson? — by John Konczal — Order management as a differentiator is a very new concept to many CSP people, but it’s become a very real sales booster in many industries. Using electronics retailer BestBuy as an example, the article points to several innovations that can — and are — being applied by CSPs today. The article concludes with 8 key questions an operator should ask to measure advanced order management progress.
NEC Takes the Telecom Cloud from PowerPoint to Live Customers — interview with Shinya Kukita — In the cloud computing world, it’s a long road from technology success to telecom busness opportunity. But this story about how NEC and Telefonica are partnering to offer cloud services to small and medium enterprises shows the experience of early cloud adoption. Issues discussed in the article include: customer types, cloud application varieties, geographic region acceptance, and selling challenges.
Billing As Enabler for the Next Killer Business Model — interview with Scott Swartz — Facebook, cloud services, and Google Ads are examples of innovative business models that demand unique or non-standard billing techniques. The article shows how flexible, change-on-the-fly, and metadata-driven billing architectures are enabling CSPs to offer truly ground breaking services.
Real-Time Provisioning of SIM Cards: A Boon to GSM Operators — interview with Simo Isomaki — Software-controlled SIM card configuration is revolutionizing the activation of GSM phones. The article explains how dynamic SIM management decouples the selection of numbers/services and delivers new opportunities to market during the customer acquisition and intial provisoining phase.
A Cynic Converted: IN/Prepaid Platforms Are Now Pretty Cool — interview with Grant Lenahan — Service delivery platforms born in the IN era are often painted as inflexible and expensive to maintain. Learn how modern SDPs with protocol mediation, high availability, and flexible Service Creation Environments are delivering value for operators such as Brazil’s Oi.
Achieving Revenue Maximization in the Telecom Contact Center — interview with Robert Lamb — Optimizing the contact center offers one of the greatest returns on investment for a CSP. The director of AT&T’s contact center services business explains how telecoms can strike an “artful balance” between contact center investment and cost savings. The discussion draws from AT&T’s consulting with world class customers like Ford, Dell, Discover Financial, DISH Network, and General Motors.
Mobile Broadband: The Customer Service Assurance Challenge — interview with Michele Campriani — iPhone and Android traffic is surging but operators struggle with network congestion and dropping ARPUs. The answer? Direct resources and service quality measures to ensure VIPs are indeed getting the quality they expect. Using real-life examples that cut to the chase of technical complexities, this article explains the chief causes of service quality degradation and describes efficient ways to deal with the problem.
Telco-in-a-Box: Are Telecoms Back in the B/OSS Business? — interview with Jim Dunlap — Most telecoms have long since folded their merchant B/OSS software/services businesses. But now Cycle30, a subsidiary of Alaskan operator GCI, is offering a order-to-cash managed service for other operators and utilities. The article discusses the company’s unique business model and contrasts it with billing service bureau and licensed software approaches.
Bricks, Mortar & Well-Trained Reps Make a Comeback in Customer Management — interview with Scott Kohlman — Greater industry competition, service complexity, and employee turnover have raised the bar in the customer support. Indeed, complex services are putting an emphasis on quality care interactions in the store, on the web, and through the call center. In this article you’ll learn about innovations in CRM, multi-tabbed agent portals, call center agent training, customer treatment philosophies, and the impact of self-service.
21st Century Order Management: The Cross-Channel Sales Conversation — by John Konczal — Selling a mobile service is generally not a one-and-done transaction. It often involves several interactions — across the web, call center, store, and even kiosks. This article explains the power of a “cross-channel hub” which sits above all sales channels, interacts with them all, and allows a CSP to keep the sales conversation moving forward seamlessly.
Building a B/OSS Business Through Common Sense Customer Service — by David West — Delivering customer service excellence doesn‘t require mastering some secret technique. The premise of this article is that plain dealing with customers and employees is all that’s needed for a winning formula. The argument is spelling out in a simple 4 step methodology along with some practical examples.

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