Investigating Fraud in the Mobile Industry: Applying the 10-80-10 principle*
There are a number of key factors to be considered when accessing the level of potential risk for fraud in the telecommunication industry. The availability of identity verification data, the response time for accessing this information and
the accuracy of the data are all important considerations.
The telecommunications industry has long been viewed as an easy target for fraudsters. Compared to more traditional sectors, such as financial services, the level of exposure to fraud is much higher as controls and processes are geared around customer services and quick response times. Balancing fraud prevention and customer services is often a challenging objective, particularly in a fast moving competitive environment such as telecommunications.
However, often the key to truly understanding fraud risks is gaining an insight in to the mind set of those in a position to commit fraud. Assessing the attitudes of the general public, as well as those of customers can be an invaluable tool for preventing fraud. Gaining an awareness of what the perception of fraudulent behaviour is, can provide the crucial advantage in staying ahead of the fraudsters.
Could you commit fraud with the knowledge and information available to you?
Consider this, if you are in a position to be able to commit fraud, then you can logically expect that fraudsters are also in prime position to run various levels of deceptions, and gain access to a range of products and services.
The 10-80-10 principle* is a theory that adds an individual's perception of fraud in to assessment of who is likely to commit fraud. It supposes that 10% of all people are 100% honest. 10% of all people are 100% dishonest and that the remaining 80% of people have a level of dishonesty based upon their own internal moral code. This is an important assumption; the theory is speculating that 80% of individuals will use their own perception of what they classify as fraudulent behaviour before proceeding with transactions or applications.
Good practices for creating effective fraud prevention programme for the telecommunications industry include; reducing the level of opportunity for fraudsters with early detection systems, regular communication and fraud updates to increase detection levels, and investing resources in recruiting the right employees to understand evolving fraud methodologies.
Applying the 10-80-10 principle*, if you have experienced employees that are trained to deal with the 10% of honest customers and the 80% of consumers who are intrinsically honest or have a level of honesty, then identifying the 10% who are habitual criminals is made much easier.
Through profiling the 10% of dishonest consumers, a discernable pattern can be found and a common modus operandi (way of working) can be recognised. This has been applied to great effect in identifying and preventing fraudulent activity. In one particular example, a fraudster's behaviour was identified and through analysing the modus operandi a set of prevention activities were put in place to stop both the impersonation and application fraud that was being committed.
Modus operandi
- Taking out a contract for her son
- So impressed with the deal she decides to take one out for herself
- Same postcode match
- Different identity documents
- New credit / debit card. (Did not know the PIN number)
- Same paper proofs but doctored to match the alias
- Never attempted a connection before 1pm
To detect the fraud a combination of factors we considered and utilised. The first bill was not paid, the same postcode was identified as being used repeatedly and the data on the paper proofs was a match but with some of the crucial ID details changed. Experian's Hunter fraud detection tool was used as part of the armory of systems designed to increase protection and minimise exposure to fraud losses.
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CCTV images, witness statements and retained documentation were also used for the criminal prosecution case. In total, 64 contracts identified over a 2 month period at an average value £650.00 per contract were identified in this example, the total loss identified to this single fraudster was £42,176.00.
Learning points from this example were that early life cycle detection is the key to minimising the risk. Predictive mapping can be very effective but requires investment, while both staff vigilance and training need also need to be implemented effectively.
Communication and information sharing is also essential to prevent quickly evolving fraud methodologies, as part of this internal re-structuring of fraud and risk departments can improve an organisation's response times to emerging threats, helping to combat both internal and external fraud.
Dave Wilson
Fraud Investigator
Hutchison 3G
*The views expressed herein are the authors only and do not necessarily represent the views of Experian. The 10-80-10 Principle theory is solely the work of the author Dave Wilson and may not be reproduced without prior consent.
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