How to Prevent Wireless Fraud

  • Fraud Prevention

As we near the holiday season, its the time of year that online and retail establishments love. I personally dont like the idea of surviving on 4 hours of sleep to wait in line with a crowd at 4 AM, but apparently many people enjoy it or at least tolerate it for the sake of a good deal. Black Friday is by far the busiest shopping day of the year, but with the hustle and bustle comes a rise in fraud. It seems that one industry often overlooked in regards to fraudulent activity is telecommunications.

Im very familiar with the wireless industry as I worked in and around telecom for several years. With the development of smart phones and the increasing dollar value of the devices, fraud has become very common. Many consumers, especially in the U.S., dont realize the high cost of their cell phone because they are accustomed to paying a subsidized price with a contract. Although the $199 you pay for your iPhone or latest Droid may seem steep, it becomes very minimal when you learn that the company that sold it to you has around triple that amount into the device. This puts a lot of risk onto the store.

So if the wireless dealer is only charging you $199, how do they make money? The dealer gets reimbursed when the first bill is paid. Beyond that reimbursement they also receive additional commission as you continue to pay your cell phone bill.

The problem occurs when an individual comes into a store or goes online using someone elses identity to purchase a phone. They may steal someones identity or pay an individual, known as a credit mule, to use their SSN and personally identifiable information. The wireless agent provides the individual with a discounted phone, under the assumption theyll receive a full reimbursement once their first bill is paid. The individual leaves the store, never pays the first bill, gets the phone unlocked to work on other carriers and sells the phone for a profit. In this scenario, the dealer is left to take a $400 loss.

This could have been avoided had the proper fraud prevention system been in place on the front end. The loss occurs because of a lack of authentication. Sure you can have someone ask for a drivers license, but it doesnt always help to mitigate the fraud. The goal is to know that youre really doing business with John Doe. Many wireless companies have found that by implementing EVS identity verification and authentication services they have been able to drastically reduce and in some cases eliminate this type of wireless fraud.

[Contributed by Shea Allen, Account Specialist]