When business opportunity becomes mobile fraud

Imagine the mood of a mobile phone sales person on hearing that the customer in his store wishes to open nine new phone lines for his business.  The commission alone should ensure a Happy Christmas!  However, recently in Petersburg, US, this kind of transaction was used to mask a fraud that has left mobile networks out of pocket by several thousand dollars.

Criminals visited two mobile stores and, falsely using the identity of a local business, signed up for a total of 16 new phone contracts – seven in one store and nine in the other.  The first sign of any problem came when the legitimate owner of the business received bills for the new mobile phone lines a month later.  You can read the full story on the NBC 12 website. 

This story highlights one of the most challenging issues for mobile operators – that of the handset subsidy applied to contract customers.  A glance at almost any mobile operator’s retail site (for example Vodafone UK’s here) shows a huge number of handsets available for free with a contract.  Obviously if the consumer thinks carefully about this, they realise that the cost of the handset is being paid for over the period of the contract – because if people had to pay the full cost of a mobile phone upfront they would change their phone less often. 

What most people do not realise is the extent of the subsidy that the mobile networks provide to contact customers.  At the date of this article an iPhone 5 SIM free on a typical website was retailing for £724.99, and whilst the networks will not be paying that much for each handset, it is still a considerable subsidy.

In the Petersburg, US, example, fraudsters would have left two retail stores with handsets worth around $8000.  These can then be unlocked and sold on the open market, leaving the network to pick up the cost of the fraud.

This kind of fraud demonstrates once again the importance of vigilance by retail staff in setting up contract customers, particularly business customers.  So much information is publically available now that fraudsters can find company information, addresses, phone numbers, registration numbers and Director’s names through a simple internet search.  It also begs the question, “why do the retailers let customers walk out of the door with products worth a small fortune rather than mailing them to the registered company address?”  A simple solution that would reduce this kind of fraud in a moment.

John McAfee’s knee jerk response raises serious issues about privacy

The Daily Telegraph reported last week that John McAfee, the entrepreneur and founder of McAfee Anti-Virus, who is currently wanted on murder charges, posted a request last week on a message board regarding how long it would take authorities to triangulate a mobile phone signal and with what accuracy.  You can see the Daily Telegraph report here. 

Whilst you can only assume that McAfee wanted this information for personal reasons, his question raises serious issues around the use of mobile technology to trace and track individuals.

It is worth starting by stating that technology is morally neutral.  It can be used as a force of good and bad.  Consider for example young people’s use of mobile phones.  Since the universal adoption of the mobile by young people, new negative phenomena such as cyber-bullying have come about (for an interesting infographic on the subject click here).  However, the adoption of mobile technology has also provided additional ways for young people to report bullying and other abuse, via text message for example.  It is clear that technology can be used for positive and negative reasons.

Location information is routinely used to locate mobile communications fraud, either by the operators themselves or third parties working on their behalf.   Being able to identify where fraud is taking place can lead to arrests, confiscation of equipment and reduction of crime.  It is therefore a far stronger deterrent than simply cutting off fraudsters’ numbers, as it actually enables criminals to be caught, rather than temporarily side-tracked. 

Of course the counter argument is that someone’s location is a matter of privacy and that whatever they are using their phone for, legal or illegal, should not be a matter for the state.  A recent ruling in the US, which is reported here, demonstrates that this is not the case.   It will be interesting to see how this matter develops over the course of the next few years and across other territories.

Either way, the answer to John McAfee’s original message board question, as to how long it would take for his phone to be traced and with what accuracy is likely to be “quicker, and with more accuracy,  than you think.”