Cerebrus Solutions, a spin off of Nortel Networks, the telecoms equipment company, estimates that billions of dollars of revenue are lost every year from mobile fraud.

The GSM Association, a mobile industry body, says E250m a year is lost from mobile roaming fraud alone - and this is just one of the most popular types of mobile fraud.

Vernon de Silva, senior vice president for strategic marketing at Cerebus, says: "Drug barons are turning to mobile fraud because it's easier. The sums involved can be significant. One US operator, now absorbed by a rival, lost $9.6m in six weeks."

There are many different types of mobile fraud, with new variations being developed all the time. The most common by value according to Cerebrus, which produces fraud-detection software, are:

*Internal fraud, which accounts for 40.3 per cent of losses from mobile fraud. This may involve an employee altering the telecoms switch to give a free mobile number or numbers to friends - who use them for commercial gain.

*Premium-rate services fraud, which accounts for 13.1 per cent. Here bogus companies set up premium-rate services and collect revenues from the mobile operator knowing their services have been called up by fraudsters who will never pay.

*Subscription fraud, which accounts for 11.6 per cent. This involves registering for a service under a false name or signing up for a service with no intention of paying for it. *Roaming fraud (running up bills outside the home network with no intention of paying), which accounts for 11.4 per cent of losses.

*Prepaid fraud, which accounts for 10.8 per cent. This includes cloning prepaid cards from newsagents, so one card's details can be used by 100 or so people.

Many of the same types of fraud crop up again when looking at the most frequently reported cases. Subscription fraud and roaming fraud are the two most frequently reported types, accounting for 40.8 per cent and 16.3 per cent respectively, according to Cerebrus data based on telecoms industry association figures.

Prepaid/scratch card fraud accounts for 9.5 per cent of reported cases; handset fraud 5.4 per cent (stealing handset shipments and changing their SIM cards or identities); and internal fraud (which is probably under-reported) 8.2 per cent.

"Whichever way you look at it, subscription fraud and roaming fraud are two of the most common types of fraud and in practice they are often related," says Mr de Silva.

"Criminals will often subscribe to a mobile service under a false identity, then go abroad to use the phone running up bills they never intend to pay. Roaming charges for using a network outside the subscriber's home network may not appear on the bill for several weeks, so considerable sums have usually been spent before the operator realises there is a problem."

Another type of roaming fraud occurs when unethical resellers in emerging markets inflate the number of subscriptions. They do this by submitting the same application forms twice, leaving an interval of a few months. If the mobile operator does not pick up on this, the reseller will receive a second bundle of handsets and SIM cards (the tiny smart cards that make a mobile work).

Typically these are split, with the SIM cards sold to organised crime, while the handsets are sold to another country such as South Africa.

A bootlegged SIM will be worth $200-$300 as it can be used to offer long-distance calls on street corners in areas where there are high numbers of migrant workers. Mr de Silva says: "A mobile used in this way can easily run up a bill of $6,000 to $20,000 in a weekend.

"Usually people will be encouraged to make short calls of no more than 15 minutes to help elude detection. Criminals also have software which enables them to piggyback a call from a second mobile on to a call record made using another mobile."

The first mobile will ring a number that isn't answered creating a call record, he explains. But as the call is not answered most of the record will be deleted, making it unlikely that the call will be traced. Some operators, however, leave part of the call record open, enabling criminals to piggyback off this call record undetected.

Another type of roaming fraud occurs when people run up bills abroad that exceed their credit limit and then don't pay. This is believed to be a problem for some Netherlands operators, which experience high call traffic levels from people on holiday in Greece in the summer months calling home. Or for other European operators, which experience surging holiday traffic from budget sunspots.

The operators don't always get details of these calls immediately, hence it is hard for them to prevent them being made if they exceed users' credit limits.

The US-based Communications Fraud Control Association says that fraud costs its (fixed and mobile) telecoms members between three and five per cent of gross revenue annually. Revenue leakage from roaming fraud is believed to account for 0.3 per cent of airtime revenues and this is an area, Cerebrus is specifically targeting.

On May 21, it launches RoamAssure, a hybrid system that uses patented neural network software in conjunction with a rules-based system to detect fraud. Essentially it uses mathematics to detect patterns likely to indicate fraudulent use, and to make links between patterns.

"For example, if it finds a phone making frequent one-second calls that is likely to indicate roaming fraud," says Mr de Silva. "The software can also be used to detect patterns of calls likely to indicate other types of criminal activity, such as terrorism."

Cerebrus says its software costs around $150,000 depending on the size of the operator and will be able to detect at least 10 per cent of fraud - paying for itself in weeks or months. Fraud detection software is also available from US-based Roamex, which runs a clearing house for inter-network call charges, BT Wholesale, which has teamed up with telecom fraud prevention specialist Azure, Easytel and Ericsson.

Stuart Horwood, managing director of BT wholesale markets, says: "IDC has highlighted the frightening scale of this problem [identifying 200 variants of telecoms fraud], and the telecommunications industry must learn to protect itself in order to survive."

NEWS IN BRIEF

E-commerce growth halves
Market researchers IDC estimate that e-commerce revenues will grow in 2001/2002 by just 11.5 per cent - only half what it was in 2000/2001. Bill Clough, research manager, says: "Scepticism will continue to hold back growth throughout 2002, until significant pressures to update supply chain investments and to ease integration alters the market." He expects the market to show revenues of $4.7bn by 2006, with year-on-year growth reaching 45 per cent towards the end of the period.

Changing Lans
What do airports and hotels want from wireless Lan equipment? Something that blends in, according to research by Nokia. "The owners of public places are often understandably reluctant to allow unsightly telecoms infrastructure on their premises," says Matti Mikkola, senior industrial designer at Nokia Networks. "We found their major requirement was a descreet visual design." The solution? Nokia has designed Wi-Fi wireless access points that can be painted to match the surrounding décor. They are also quicker to install because they have built-in antennae.

Top wireless tricks for business
The top five wireless technologies - apart from voice - that can give business a return on investment are: Bluetooth (a short-range wireless technology), personal digital assistants with mobile links, mobile messaging, packet-switched mobile networks and wireless Lans, according to a Deloitte Consulting report. For example, it says Bluetooth is finally becoming relevant to business for exchanging small data files over a short distance, and for everything from office network security to streamlined car-rental return to plant maintenance. The Top Five Mobile and Wireless Technologies for Business is available on www.dc.com.

Whither wholesale?
How can the wholesale telecoms market be reinvented? Detlev Diessner, senior executive vice president, international carrier services, at Deutsche Telekom unit T-Systems International, will address this issue at Unified Communications International (UCI) Global. This conference and trading show for carriers and co-location companies, will also include speeches from large companies which purchase wholesale telecoms capacity. A day-two keynote on "demanding times" will be given by Malcolm Matson, founder of COLT. The show, organised by Tarifica, takes place from May 28-30 at Olympia 2, London. More on www.uciexpo.com.

MMS no big challenge to SMS
Multimedia messaging for mobiles (see article in section on 3G) will be no overnight sensation, according to UK-based researchers Ovum. It believes that SMS will continue to be the predominant technology used for person-to-person messaging over mobile phones during the next five years. Multimedia messaging (MMS) usage will only begin to grow strongly around 2004-2005, says John Delaney, co-author of Ovum report MMS and SMS: Multimedia Strategies for Mobile Messaging. "There is a large hole in the business case for the 3G [third-generation mobile]," he says "and a single, simple solution to this problem is so appealing… But MMS is not this killer-application."

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