Bypass and SIM Box fraud continue to cause huge financial damage to telecoms.
In a 2015 survey, the CFCA estimated annual bypass losses of $6 billion globally.
But what are the losses to the nations affected by bypass? Well,
that’s a tough question to answer. In fact, no international body
— ITU, United Nations, etc. — appears to be actually quantifying
the global damage to nations.
Many critical questions are not being adequately discussed. For
instance, what are the various kinds of damage — financial, economic,
and social — that bypass fraud inflicts on a nation? And what’s
the proper role of policy makers and law enforcement? Should they take
a hands-off approach and let the telecom operators drive the solution, or should
governments get more actively involved?
Well, for some perspective on these issues, I interviewed Lex Wilkinson, CEO
of LATRO Services, a boutique solutions firm who specializes in solving telecom
bypass problems. Lex provides a clear explanation of the many subtle problems
associated with bypass and SIM box fraud causes. And he also discusses
a case study in Jordan that shows how regulators, operators and solution vendors
can successfully work together to contain the problem.
Dan Baker, Black Swan Editor: Lex, I think a good starting point is to better understand
the full scope of the bypass and SIM box issue. What kind of damage does
bypass cause? And what are the issues that regulators and other government
officials need to be concerned about?|
Lex Wilkinson: Dan, the global damage that illegal bypass causes is substantial
and it goes far beyond the loss of tax or operator revenue. At LATRO,
we categorize SIM box bypass damage under three main categories:
- financial and revenue damage;
- infrastructure and service quality damage; and,
- security and privacy damage.
It’s worth spending a couple minutes discussing these issues one by one.
So here we go:
Financial & Revenue Loss
- Tax revenue loss — First and foremost, of course, international
phone calls are a big source of tax revenue and foreign exchange currency, especially
for nations in the developing world. The tax revenue is used to fund national
infrastructure and many other things. But if 20% of a nation’s foreign
incoming calls are being bypassed, then 20% of tax revenue is lost.
- Operator revenue loss — The licensed telecom operators of the country
also lose revenue, which could kill their business and at the least cause them
to earn a much lower return on their investments. Instead, the revenue
lost goes to enrich criminal organizations usually in foreign lands.
National Infrastructure & Service Quality Damage
- Damage to a Nation’s Economic Infrastructure — Communications
infrastructure is vital to a nation’s economic prosperity and growth.
And it’s becoming more and more vital today as the information technology
that drives business — and economic development — is migrating to
So protecting the licensed operators and preventing bypass
competition is sound public policy. If SIM Box fraudsters destroy the
incentive for private telecom operators to invest and grow their infrastructure,
great damage is done to the larger society. Another important issue is
that bypass causes the licensed operators to invest wastefully in wireless and
backhaul infrastructure in locations where SIM box bypass occurs.
- The Quality of Phone Service Suffers — To boost their revenue,
fraudsters cut corners on voice call quality wherever possible. They use
low rate voice encoders that deliver low quality of service calls. Plus
much of the revenue for driving fraudulent traffic comes from low-priced calling
cards sold in foreign countries. In short, the average quality of voice
service in a country is significantly reduced by SIM Box bypass.
Security & Privacy Damage
- Lawful Intercept Systems are Bypassed — When an international phone
call terminates through a SIM box, it not only bypasses the international gateway
of the telecom operator, it also sidesteps the nation’s Lawful Intercept
systems, the legal surveillance means police and intelligence agencies use to
track criminals and terrorists.
So why does that occur? Well, when
a call is diverted through an illegal SIM box, the originating phone number
is stripped away. What the telecom system sees is the phone number of
the illegal SIM card, not the actual originating number from the foreign country.
So, for example, if the authorities in U.A.E. want to legally wiretap a known
terrorist in Yemen making calls into the U.A.E., they risk missing any calls
that are redirected through a SIM Box.
- Phone Calls Lose their Privacy and Security Protections -- Public
networks have a high degree of security and privacy built-in. GSM mobile networks,
for instance, are encrypted to protect the subscriber’s privacy.
Normal VoIP traffic also passes through the secure networks of interconnect
But when calls are redirected through an illegal SIM box, these
security measures are often not there, meaning the phone calls can be tapped
into by criminals or hackers in the path of those IP connections. Now
the reason the SIM box fraudsters don’t protect the calls is to avoid
extra costs: a simpler network means they don’t need to hire security
equipment and experts.
- SMS Messages are Compromised — In addition to phone calls, the
security of SMS messages is also compromised by SIM Box bypass. This issue
is especially troubling today now that bank notices and other confidential information
are regularly being passed to mobile subscribers via SMS.
Great, Lex. Your discussion of the various kinds of damage shows how
multi-faceted and dangerous the bypass problem truly is. But what about
the threat itself? The problem has existed for many years now. Is
it increasing or decreasing?|
Dan, despite the high investments operators have made in controlling bypass,
we at LATRO strongly suspect that the SIM Box problem is actually increasing worldwide.
LATRO serves operators in many countries, and in many of these places international
voice revenue has declined sharply due to SIM box bypass. After we enter
a market and insert our technology and work with the operators, regulators,
and police, international voice revenue goes back up again.
So what’s causing the increase in SIM Box bypass? Certainly one
of the chief causes is that fraudsters are more sophisticated today. They’ve
become experts at avoiding detection and using stealth technology.
Managing and controlling SIM box bypass has evolved over time. And control
techniques that worked well only a couple years ago have been neutralized.
For instance, many nations have launched government programs to control the
purchase of SIM cards on the local market.
Now initially these programs did their job: they caused the fraudsters some
headaches and made getting a fresh supply of SIM cards much harder. But
recently — with the rise of SIM Server technology — SIM card purchasing
controls are steadily losing their effectiveness.
Here’s why: the SIM Server allows the fraudsters to centralize the command
and control of bypass operations. What they do is drop their SIM Server
in a country like Monaco, Jamaica, or anywhere actually. Then they use
that one Server to control bypass across multiple countries.
Here’s another key advantage they gain with SIM servers: the SIM cards
themselves no longer need to live in the local infected network. The SIM
cards can be consumed in a large bank of SIM cards adjacent to the SIM Server
in the criminal’s country halfway around the world. So today, the
only things they require in the local network are the antennas that retransmit
the fraudulent traffic onto the local mobile network.
Now perhaps the biggest concern of all is that, with the help of SIM Servers,
the fraudsters can lower the telltale usage of any single SIM card to the point
where it flies “below the radar” of easy detection by fraud management
NOTE: For a interesting discussion of the SIM Server challenge, and current
methods used to detect and block bypass, we recommend you download and read
TRI’s white paper on the subject.
OK, if SIM box bypass is now harder to combat — and government SIM card
controls no longer work like they used to — what’s the proper role
of governments and regulatory bodies in the fight? Sounds like the SIM
box problem has become a more technical issue, suggesting operators need to solve it on their own.|
Though it may sound counter-intuitive, the exact opposite is true, Dan.
Since the fraudsters are now more technically savvy at their deception game,
governments must actually step up and play a more active role in protecting
their country from bypass. Here’s why:
- Fraudsters Seek the Path of Least Resistance in a Country. The
fraudsters usually locate their SIM boxes in highly populated areas served by
multiple carriers. Now operators vary quite a bit in their competence,
focus, and resources to deal with bypass fraud.
Let’s say there are three operators in a region. Operators 1 and 2 have a relatively good
SIM box detection program, but Operator 3 is weak. Well, the fraudster
can push more traffic toward Operator 3 because it has the weakest defenses.
But notice, because the fraudsters have diverted their fraud toward the weak
operator’s networks, the amount of actual bypass within the country remains
the same: government tax losses remain the same as before!
- The Regulator is in the Best Position to Optimize the Deployment of SIM Box
Detection & Blocking Resources — LATRO Services has developed a patented
Protocol Signature detection method based on network signaling probes that detect
and block SIM Boxes as soon as they sign onto the network. Now a resource
like that is best deployed in a single city area served by multiple operators.
To deploy that technology in one operator’s network alone is less effective,
because the fraudster simply redirects its traffic to mobile operator not protected
by LATRO’s probe.
- Law Enforcement’s Effectiveness is Enhanced — Since a key
goal is to seize SIM boxes that affect multiple operators in a region, it’s
more effective if the government regulator coordinates the use of LATRO’s
technology to pinpoint the actual location of the SIM boxes and work with the
police to go in to confiscate equipment and make arrests in one fell swoop and
surprise the fraudsters.
So what can be done, Lex? What’s a typical SIM box control strategy?
How have regulators worked with you in the past to make a dent in the problem?|
Well, we recently worked with the Telecommunications Regulatory Commission (TRC)
in the country of Jordan. The project was a big success because SIM box
bypass was substantially reduced and a total of 16 SIM box operations were prosecuted.
The project’s success was largely due to the coordinated effort of: government
regulators, local law enforcement, the mobile operators in Jordan, and LATRO’s
unique SIM Box locating technology. Here are the four main steps in that
- SIM Boxes were Detected & Revenue Losses were Stopped — Intelligence
from LATRO’s SIM Box detection systems and the Jordanian operators were
combined allowing TRC to successfully block SIM card use and prevent further
financial loss to the operators and the Jordanian government.
- The Fraudsters’ SIM Box Deployments & Strategies were Exposed —
Running all the detection data through LATRO’s Versalytics analysis platform
provided TRC with a comprehensive view of fraud activities in Jordan.
Individual SIM Box fraud operations were then further analyzed through LATRO’s
proprietary pattern recognition technology.
- SIM Box Locations were Precisely Pinpointed — Using the network
intelligence on SIM Box activity as a starting point, the TRC team uses LATRO’s
Radio Frequency (RF) investigation tool to identify the exact location of the
actual SIM Boxes.
- SIM Box Operations were Busted — TRC then mobilized its law enforcement
resources to take action. In just a few months, Jordanian police forces
seized and confiscated 449 SIM Box modems representing 646,000 potential minutes
of fraudulently terminated calls. This produced an estimated revenue savings
in Jordan of $1.36 million.
So this gives you an idea what can be done. Now I emphasized the revenue
savings because that’s the easiest benefit to calculate, but Jordan certainly
also saw improvements in the telecom service quality and security/privacy areas
we discussed before.
Lex, thanks for this fine briefing. Your discussion not only educates
regulators on what’s at stake, you’ve also shown that much can still
be done to attack this bypass and SIM Box cancer that afflicts so many nations.|