The different frauds: Interconnect Bypass

Traditionally, mobile fraud was seen as something that took place against the consumer – this is often what generates the headlines.  But there are also a number of mobile frauds that are hidden from the end user. 

They may be inadvertently involved but often users are completely unaware they are participating in a fraud.

Over the next few weeks we will be highlighting some of these frauds and the implications they can have for the mobile industry.

Interconnect Bypass:

Interconnect bypass is also known as GSM Gateway or SIM Box fraud.

When you make a call abroad, a number of different telecoms operators will handle the transfer of this call from home to the other side of the world.  This all happens automatically and within hundredths of seconds, but each company will be paid a small proportion of the call revenue for passing the call over their network.  When the call arrives in the destination country, the local operator will be paid what is called a ‘termination fee’ for passing the call on to the recipient.

The opportunity for fraud comes when the value of the termination fee exceeds the cost of a local mobile to mobile call in a country.  For example, if the termination fee is 10p, but the local operator offers local mobile to mobile calls for 5p a minute, there is a potential money making scheme of 5p per call available if someone can divert calls from the mobile operators traditional routes.

The next question is how to achieve this? This is where the ‘SIM Box’ element of the fraud comes about.  SIM boxes are machines that can house thousands of SIM cards.  If you fill a SIM box with active cards, you can connect and terminate as many calls as you have SIM cards.  And if the 5p per call opportunity exists, you can generate this from every call.

So how do these ‘call terminations’ end up in the telecoms system?  Mobile operators tend to have relationships with other operators through which they ‘buy’ a number of minutes on their network each month.  But there is also an “open market” for the buying and selling of call termination.  This enables operators to sell on excess capacity they have or buy more terminations if they need them in a country.  SIM box fraudsters will bundle together millions of terminations on thousands of routes between countries and sell these on the open market.  These can end up as part of the routes that operators buy to terminate calls meaning that the calls are diverted from the mobile operator in country through a SIM box fraudster.

Why does any of this matter?  For the operators the answer is obvious – they lose money from not terminating as many calls as they would if SIM box fraud did not exist. 

But there are also implications for consumers and even governments.  A consumer would not know that their call is being routed via a SIM box but they might well be aware of a poor connection, interference on the line or calls that cut out.  They will also not receive normal telephony services such as caller line identity. 

For governments the issues are more complex.  SIM Box fraud often funds other frauds, organised crime and exploitation.  Furthermore, governments lose a proportion of the revenues that the operators should be paying them.

SIM Box fraud is one of the most serious frauds for operators.  It is estimated to cost operators billions of dollars a year.  Whilst the public might not recognise it as a consumer facing fraud, its implications are considerable.