Telecommunications Fraud

By O'Brien, John T. | The FBI Law Enforcement Bulletin, May 1998 | Go to article overview

Telecommunications Fraud


O'Brien, John T., The FBI Law Enforcement Bulletin


The 1990s have been called the communications decade. New communication systems spring up seemingly overnight, and existing systems have expanded rapidly. This has been a great convenience and even a lifesaver for many citizens. At the same time, it has created opportunities for fraud.

Whether they use false information to establish customer accounts or employ technologically sophisticated means to steal account information, techno-criminals target both innocent citizens and telecommunications carriers with a variety of fraudulent schemes. Yet, despite the advanced technology used by some offenders, law enforcement agencies can combat these crimes using traditional methods. Successful resolution of cases involving telecommunications fraud often depends on partnerships with service providers, combined with an understanding of the nature of the crimes.

Telecommunications Systems

The communication systems in the greatest demand by consumers are cellular telephone and personal communication services (PCS). Although cellular telephone and personal communication services differ in their technology and the regulatory requirements, the two terms often are used interchangeably. Both are portable methods of communication between a moving subscriber and the landline telephone system. In both services, subscribers use a portable handset to establish a connection through a cell site. The cell site serves as a base station for a specific geographic area called a cell. In a large city, a cell may cover only a few blocks. In a rural area, one cell may encompass several square miles. As a moving subscriber travels from one cell to another, the connection automatically transfers to the new cell site.

Types of Fraud

Cellular telephone and PCS fraud can be divided into low-tech fraud and high-tech fraud. Subscription fraud is the least sophisticated and the most common form of fraud. One consulting firm estimated that subscription fraud accounts for 80 percent of all PCS fraud.(1) Individuals establish service using false credentials, including their names, social security numbers, credit references, and salary information. They use the service but never pay for it. The carrier eventually disconnects the service but never recovers the costs or lost revenue.

Though disconnected by the home carrier, these individuals can continue to place calls by doing so from outside the home carrier's service area. The time delay between the delivery of this roaming service and the report of the service to the home carrier makes this type of fraud, called roaming fraud, possible. Roaming fraud proves especially costly because the home carrier remains responsible for paying the charges owed to the carrier that provided the roaming service. All cellular telephone and PCS carriers will be required to provide nationwide roaming service by June 1999. This will create greater opportunities for roaming fraud.

The most prevalent form of high-tech fraud is cloning fraud. Individuals acquire legitimate account information either by outright theft from a carrier or by on-the-air interception. On-the-air interception of account information is possible whenever a cellular or PCS telephone is turned on, even if it is not being used.

Armed with someone else's account numbers, the thief programs them into a cellular or PCS telephone, creating a clone of the legitimate phone. After the home carrier has disconnected the service, the user may continue to place calls by using roaming service, thus committing roaming fraud.

Any cellular telephone or PCS network is vulnerable to low-tech fraud. The vulnerability of a cellular or PCS network to high-tech fraud depends on the technology the carrier employs.

Vulnerability to High-tech Fraud

Most cellular telephone carriers use advanced mobile phone service (AMPS). AMPS transmits an unencrypted analog frequency modulated (FM) signal, which can be intercepted with any FM receiver, such as a scanner. …

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