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Call routing scam costs telcos $150m a year

Victims often unaware of complex phone swindle

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Fraudulent call termination is costing operators huge amounts of money, though the victims are often unaware they've been tricked.

The elaborate scam involves routing international calls onto local numbers, then using promotional offers offered by local telcos to connect the call without handing over the termination fee. UK outfit Revector, which has detected this swindle in 50 countries over the past two years, puts the revenue loss at $150m annually and points to one European operator who was losing more than a million dollars a month.

To understand how such a fraud works, it's worth taking an example: imagine a Vodafone customer in the UK is calling a friend in Haiti, who is on Digicel Haiti. In the normal course of things, Vodafone pays a termination rate to the Haitian operator for every minute of conversation, helping to fund that operator.

However, Vodafone doesn't deal directly with every operator around the world; numerous call-handling companies pitch their rates to companies such as Vodafone who work on the assumption that Digicel will get their cut.

For the sake of our example let's assume that Vodafone slips up and signs a call-routing deal with a Scams 'R Us. Scams 'R Us gets a whole lot of local SIM cards for Digicel Haiti, which allow free calls to other Digicel subscribers. Those SIMs get dropped into a box that can route incoming calls out again, and Digicel thinks they're local connections so collects no termination fee.

Vodafone, on the other hand, pays the fee in good faith, which is how Scams 'R Us makes its money. The callers get a lower-quality connection than they hoped for, but probably won't notice, especially if Scams 'R Us can bodge the caller ID (sometimes possible, depending on the receiving network).

The same thing applies the other way, of course, and with intra-operator calls so often being free these days the incentive only increases.

On the global scale of things the amount of money isn't huge, but the scam is indicative of how complicated international telecommunications is these days, and a reminder that the inventiveness of the scammer should never be underestimated. ®

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