Incidents of cloning fraud and associated revenue loss have dropped more than 80 percent in Bell Atlantic Nynex Mobile’s cellular markets since the company started aggressively using personal identification numbers and implementing other fraud control measures, said Nick Arcuri, the company’s vice president of fraud control.
In fact, 4,000 cases of cloning fraud were reported in January, and less than 500 cases were reported in July, stated Arcuri. Likewise, the amount of money lost due to cellular fraud – which can vary between about $500 and $1,500 per case – has decreased more than 80 percent in the same period.
These numbers represent a total between Bell Atlantic Mobile and Nynex Mobile Communications markets, which together have worked to control fraud since the beginning of the year. The two cellular operators officially merged two months ago. The company’s markets extend from Maine to South Carolina, encompassing 15 states and the District of Columbia, said Jim Gerace, spokesman for Bell Atlantic Nynex Mobile.
“The introduction of personal identification numbers, as well as the installation of anti-fraud software which detects unusual usage patterns, has significantly reduced fraud against our customers,” Arcuri stated.
“The beauty of our system is that the PIN number is sent over a separate voice channel from the ESN-MIN (electronic serial number-mobile identification number) number,” said a company spokesperson.
Nynex first offered PINs to its customers in July 1994, said Arcuri. Once cloning fraud escalated last fall in the New York City area, the companies became aggressive. The city and surrounding area was designated a “fraud protection zone” in January and BAM customers from Washington, D.C., Baltimore, Md., Pittsburgh and greater Philadelphia who wanted to make calls at standard roaming rates in the New York City area were identified and assigned a PIN number to enable calling.
Fraud protection zones can be established only in markets where a carrier uses AT&T Network Systems Inc. as an infrastructure provider, noted Arcuri. Whether a roaming customer is required to use a PIN in a certain zone depends on the home market. A New York customer may be required to use a PIN while in Miami, whereas a customer from another Bell Atlantic Nynex Mobile market may not.
Bell Atlantic Nynex Mobile commercially acquired its anti-fraud software, noted Arcuri, then modified it for its own purposes. The software detects fraud quickly, Arcuri explained, which in conjunction with the use of PINs, is a deterrent. For instance, a bandit initially might succeed in cloning a phone, but if detected the next day, he or she must go to the trouble of reprogramming the phone again for continued use.
PINs and anti-fraud software do not guarantee fraud prevention, but have served as an excellent deterrent with dramatic results. “We needed an immediate solution,” Arcuri said, referring to New York’s previously urgent fraud situation. PINs, anti-fraud software and fraud protection zones together have worked to diminish fraud. About 70 percent of the company’s subscribers use PINs, said Arcuri, which can be acquired free of charge.
Bell Atlantic Nynex Mobile also is developing a cellular authentication system in conjunction with AT&T Network Systems based on industry standard technology. With this technology, each legitimate user’s phone is assigned a multiple-digit algorithm and cryptogenic “key” or password, according to Tom McClure, director of fraud management for the Cellular Telecommunications Industry Association. When a subscriber places a call, the algorithm is scrambled differently each time to avoid detection over the air. The network can identify a legitimate user through the scrambled algorithm and cryptogenic key combination.
The company also is testing anti-fraud platforms engineered by Seattle-based Cellular Technical Services and Corsair Communications of Sunnyvale, Calif. but has made no commitments to deploy the technology of either company, commented Arcuri.
Going forward in its cellular operations, Bell Atlantic Nynex Mobile identified three goals. Gerace said the company is working to grow its cellular base quickly, build and expand its network and drive as much cost out of the business as possible. Measures to reduce costs include refining distribution strategies, continuing growth of retail stores – which now number about 100 – and acquiring customers through efficient marketing channels including telemarketing.
