ORLANDO, Fla.-Subscription fraud-the practice of assuming another person’s identity and possibly his or her credit history-is the successor to cloning in the wireless industry, and carriers are putting in place a number of internal measures to combat the problem as transparently to the subscriber as possible. There may be some internal resistance to the change, but those who have done it term fraud-busting measures a necessity, no matter what.
“We’ve come full circle,” said Melba Martin, manager of fraud control at BellSouth Cellular, speaking to attendees of last week’s Wireless Fraud ’97 here. “We started out with subscription fraud years ago [until cloning was found to be easier] and now we’re back with it again.” In- and out-of-house sales forces are requiring more information from potential subscribers before a phone is activated-a photo ID, a signature and an upfront credit check. “It may be inconvenient, but it is absolutely necessary,” she added. If there was one wish regarding subscription fraud that could be fulfilled today, Martin said, “We need a system that can detect a subscription discrepancy and then immediately prevent an activation. Right now, we only have the detection.”
Shelley Porter, Palmer Wireless’ fraud manager, uses a point-of-sale credit check system and profiling to try and weed out subscription fraud. It took a while for her company to decide what was true bad debt and what was subscription fraud, and she admits that Palmer’s personnel and resources are too limited to do the kind of upfront screening that is needed to really knock down fraudsters.
“As larger carriers around us implement more aggressive programs, like RF fingerprinting, we know we will have to do that, too,” Porter said. In the meantime, agreements with neighboring roaming partner AirTouch have shut down some of the “bad guys;” BellSouth has pledged its help as well.
In this age of instant activation and instant credit, salespeople need to be on the lookout for customers who want a lot of features and air time for nothing, who want to get in and out of the store quickly, and who don’t want to share personal information or participate in a credit check. While salespeople who depend on commissions as a large part of their salaries may activate these people, they should be urged to file a fraud alert with the fraud manager so that the accounts of these new subscribers can be monitored.
Martin and Porter both have put programs in place in which welcome letters are sent out quickly (if they are undeliverable or if the true resident calls back with questions, service is terminated), and welcome calls are made within 48 hours of an activation (if there is no acknowledgement or if the person has no idea what the marketer is talking about, service is terminated).
With the holiday selling season scheduled to begin soon, there also will be increased incidences of credit-card fraud; most will be detected at the point of sale, but some will slip through.
Personal communications services provider American Personal Communications/ Sprint Spectrum, which turned on the first U.S. system nearly two years ago, didn’t count on fraud as an inevitable problem, and when the pain began, it hired former cop Bob Holliday as its director of risk management six months into its existence.
“We took on a lot of customers right away, and we didn’t think we’d have fraud,” he said. “I came in April of 1976 and found out that no one was dedicated to fraud. It was devastating.” Upon performing his first risk assessment among all divisions of the carrier in Washington, D.C., “I found a room filled with returned mail, an indicator of fraud.” When he presented his findings to senior management, who already were aware of the problem, he was given carte blanche.
“The bad guys are always out there looking,” Holliday said. “You need to have the proper front-end systems, like connecting an address to a home phone number, tight credit scores and an analyst who can do manual credit checks and ask questionable subscribers the right questions, if need be.”
While it may not be a popular move, Holliday urged carriers to “take a good look at your employees and do a background check if you haven’t already.” If an employee has been compromised in any way from an outside source, “make an example of him … fire or prosecute him. It will have an impact,” he said.
With the marketer’s dream-over the air activation-such upfront checking becomes almost impossible. “We were the first to use over the air activation and, after 20 years in law enforcement, it scares the hell out of me,” Holliday said. “There is no proof of ID, and criminals will get through the system, especially if they’ve assumed someone else’s ID.” Agreeing with him was BellSouth’s Martin, who hopes that her fraud team will have increased interaction with the marketing team on these issues.
Pre-paid service, another marketing idea that has caught on with subscribers, is another invitation to subscription fraud.
“It sounds good, but you have to be prepared to shut fraudulent subscribers down immediately when they go over the limit,” Holliday said. “Although it’s a great marketing feature, pre-paid service is a nightmare if a wiretap ever has to be put in place. While Sprint Spectrum hasn’t had to deal with this yet, we will need to get more personal information from people who want this service.”
He continued, “We all have to work with marketing people, although many business decisions already have been made by the time a meeting is called. Fraud people have been called `customer unfriendly,’ but there has to be a balance.”
