Presentation on uncovering the recent dilemma that fraud departments face – today and tomorrow given by Jason Lane-Sellers, cVidya's Fraud Expert, at Arena International's Revenue Assurance, Fraud Reduction and Cost Management in Telecoms 2012 conference in London.

1. Uncovering the recent dilemma
that fraud departments face – OPERATIONAL
RISK MANAGEMENT
today and tomorrow & COMPLIANCE
Revenue Assurance, Fraud Reduction and Cost
Management in Telecoms
Jason Lane-Sellers
Fraud & RA Expert, cVidya
© 2012 – PROPRIETARY AND CONFIDENTIAL INFORMATION OF CVIDYA

2. Today
Top
down
New perspective –
Dilemmas Operational Risk Expanding
& fraud remit for fraud
Management challenges
How to
become a
revenue
generating
unit
2

3. Fraud Manager’s Dilemmas
How can I generate new
How do I develop proactive revenue streams from
approach to protect the the same tools I use to
organization from future prevent losses?
fraud threats and challenges?
How do I protect my
organization from current
fraud threats to minimize
revenue losses?
3

4. A Shift In Approach
Fraud departments are Effective :
obliged to be more: Achieve more with fewer resources
Support large volumes and multiple types of transactions
Align activities with corporate business goals
Demonstrate their activities and effectiveness within the organization
Proactive:
Assess risks of services & products pre-launch
Top down analysis & prioritization
Innovative :
Stay ahead of threats and challenges
Produce revenues as well as prevent losses
Be prepared for upcoming technologies and products
4

5. Fraud Challenges Worldwide
2011 Estimated Fraud Losses by Fraud Type (in $ USD Billions
Wingrall 0.64
Theft of Content 0.64
Pre-Paid Fraud 0.64
Clip-on Fraud 0.64
Internet 0.96
Cable or Satellite 0.96
Social Engineering 1.12
Theft of Equipment 1.12
Theft of Equipment 1.28
SS7 Manipulation 1.44
Iternal/Employee Theft 1.44
Identity Take Over 1.44
Domestic Revenue Share Fraud (DRSF) 1.60
Roaming Fraud 1.76
Arbritrage 1.76
Dealer Fraud 2.08
Premium Rate Service 2.24
Credit Card Fraud 2.40
Bypass Fraud 2.88
International Revenue Share Fraud (IRSF) 3.84
Subscription Fraud 4.32
PBX 4.96
5

6. Understanding What the Issues Are
Problems with classification Identity
PABX IRSF BYPASS Sub Fraud
and terminology takeover
– Primary and secondary
frauds
Credit Card PRS Dealer Arbitrage Cable
– Reason for fraud or fraud
type
– Understanding meaning Revenue
and terminology Roaming share Internal Call Sell Internet
(domestic)
– Generic groupings
This means that fraud issues
Social SS7
of the same nature can be Clip On Wangiri Content
engineering manipulation
split across result gained
6

8. The Traditional Fraud Department
Traditional Operator Fraud Teams
Operation & Investigation teams
Seen as a necessity - no benefit recognition
Operations – measurement focus, high volumes
The Fraud of incidents and high number of personnel
Department Investigations – small case loads, long timespans,
legal actions, minimal recovery
Simplistic process, lack of technical
understanding
No commercial skill sets, or process expertise

9. The Commercial Driver for Change
Reduced Cost Structures
Outmoded teams can struggle and personnel reduction
with effectiveness and strategy Lack of business
Increased risk taking and
reduced barriers to entry understanding can reduce
fraud identification and also
Increases impact of issues and Increasing cause conflict
Customer Base
frequency – so cannot afford
resource hogging operations
Increasing Services and Multiple services increasing
internally
product portfolios fraud types, risks and
complexities
Marketplace competition
increases the needs for Highly
competitive
departments to contribute to the marketplace
bottom line
9

10. Top Down Perspective
CSPs rely on Revenue Intelligence practices to ensure they remain competitive
Revenue Intelligence can and must achieve more
current approach is mostly reactive and lacks a high level view
– Sometimes one-off consulting is used, but it is not sufficient as results are quickly outdated or does not
become part of day to day operation
Revenue Intelligence must be a methodological, top-down operation which has the
needed information and models for operating in the most effective manner
A need to base strategy on clear, solid, and visible methods that provide valid planning
ahead
10

11. Risk Guided Fraud Management-Top down analysis
Define Business Goals (CFO)
Report
Define Risk Targets Exposure, Risk level,
Recovery forecast
Risk Mitigation Risk Assessment Evaluate
Planning per LOB/Process Effectiveness
Risk Guided Revenue Intelligence
Define Operational Execute and Follow-up, Fix,
Rules & KPIs Monitor Reclaim
Operational Revenue Intelligence
11

12. Fraud – A revenue generating
unit?
12

13. TURNING A Lemon To Lemonade
Sales and partner
Increasing internal risk management
positioning for Protection
Fraud offering for corporate
Departments Customers
FMAAS - Fraud
Management As A
Service for Partners
Service Abuse
Management
Behavior analysis
capabilities for
Marketing
13

14. Areas to Consider
Partner FMAAS Service Abuse Management
– Provision of FMS for Partners (such as – Product protection
VNO’s & Wholesale)
– Margin, T&C’s & FUP’s
– Spam, SMS, Bypass etc
Enterprise Fraud Protection Services
– Enterprise PABX Fraud Management
Behavioral Analysis for Internal
– Enterprise Risk Management
departments
– Customer profiling
Sales Channel Risk Management
– Anomalous groupings
– Commissions & Payments
– Segment behavior
– Internal & external Sales teams
– Location profiles
14

15. Partners FMAAS and Enterprise
Fraud & Risks management
15

16. FMAAS
More telcos have relationships and arrangements with other operators via
MVNO or VNO relationships, Reselling agreements or wholesale
relationships
Effective fraud management is often difficult in these situations as the third
party partner owns all the customer data and the third party often has a
delay in receiving data or the data is limited
Therefore there is an opportunity for Operators to offer fraud services to
these partners to allow them to achieve effective real time management
16

17. FMAAS cont’d
Services offered to these third parties could include
– Dedicated fraud detection schemes
– Fraud Management per 3rd party
» Specific rules and analysis
» Specific profiling
– Partner FM portals
– Rule and threshold configuration & Tuning of fraud controls
– Notifications (sms, email)
– Management and operational Dashboards,
– Crowdsourcing & Sharing of information
– Hot B number Lists
– Fraudster profiles & Fingerprints
17

18. Enterprise Fraud
Movement (or regrowth) of fraud to enterprise/corporate level, including;
– Subscription & ATO fraud at the corporate/SME level
– Regrowth of PABX fraud
– IP service growth
– IP PaBX software
– Bypass/Gateway as a source
– Customer Manipulation
– Traffic pattern hiding
– Internal Fraud in the enterprise
Often the operators are blamed by the customer for not protecting them from these
type of fraud
18

19. The Enterprise Opportunity
Provision of a Fraud Management service to customers as a
differentiator including capabilities such as;
– PBX protection as a service to corporate customers (PBX detection as revenue
generator)
PBX profiling
Back-office investigation tools
– New dedicated fraud detection schemes
Management per customer
Allowable activity programming
– Corporate customer portals
Notifications directly to customers (sms, email)
Dashboards, Tuning of fraud controls
– Smartphone malware protection
App based analysis , with system integration
19

20. 20

21. Sales in Telecom
Sales forces are divided to several groups:
– Tele-Sales & CS (over the phone)
– B2B (divided to geographical areas)
– Stores and online channels
– Distributers, Dealers & Resellers
Telecom carriers push their sales
representatives towards highly aggressive
targets
21

22. The Permanent Dilemma
How strictly are you monitoring their actions ?
What is the level of freedom you provide in order to pursue
“the desired signature on contracts “ ?
What will be the price of constant critique ?
Sales organizations often avoid asking too many
questions when the contracts keep coming …
22

23. Sales Channel Fraud Control
Can you utilize your System for the monitoring of sales activity
– Across all channels
– Telesales, CS, Direct Retail
– Partners, dealers, resellers
– Volumetric & Patterns
– Individual, function, location
– Type, products, services and add-ons
– Locational information analysis
– Sales patterns, Application patterns
– Commissions payments & calculation validation
– Overpayments, abuse etc.
– Usage Analysis
– Non use, location validation, profiling etc.
Performing such action can aid manage commission budgets and dealer
payments
23

24. Service Abuse

25. Service Abuse
Issues Ownership
– Financial
– Margin erosion
– Many organisation do not recognise the
– Small scale large impact impacts of abuse
– Arbitrage – Is one area responsible for abuse
– Interconnect revenue impact management?
– Resale – Different types of abuse can often be
– Sales & Growth impact managed but separate groups in the
– Network Opco
– Component & Node overload – Fraud, networks, marketing, CS
– Charging and verification
– Does the Opco have FUP’s or T&C’s on
issues
– Service quality impact these types of plan
– Opportunity loss, churn – Is the management (if any) of these
– Service access impact FUP/T&C’s manual processes or
– Opportunity loss in access automated
– Brand
– Customer experience
25

26. Service Abuse – The Opportunity
The fraud department is ideally placed to manage service
abuse and provide value to the organization
An Effective FMS/RA system can provide this capability to
add value via;
– Monitoring and alerting of high level abuse
– Identification of margin negative services or entity
– Traffic profiling and analysis
– Locational, multi/single party, diversity etc.
– Alerting and notifications for T&C or FUP abuse
26

27. Internal Promotion
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28. Internal Promotion
Fraud & RA teams could utilize their capabilities to promote their
benefit internally to other departments
Information analytics used for fraud and RA can provide vital data
internally such as:
– Profiling behavior
– Defining norms per product and service
– Identification of anomalous or out of norm activity segments
– New product potential
– Margin Analytics
– Lifecycle analysis by product and services
28

29. FM&RA units need to keep track and be ahead of
challenges
Understand your internal strengths and its potential
commercial value to the organizations
Increase your department’s position in the company
by offering prevention services to your customers and
partners
Increasing the capability range and coverage of the
fraud and RA teams is essential
A truly intelligent, flexible system or tool set can
support the process of transforming the fraud area
into a profit center
29

30. THANK YOU!
www.cvidya.com
Jason.Lane-Sellers@cVidya.com
www.cVidya.com