Dror Eshet Dror Eshet FraudView® Product Manager - cVidya

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Credit Muling fraud

  • Subscription fraud is still one of the most grievous fraud types telecom operators suffer from, causing the industry financial damages of over $5 Billion annually¹. The fact that premium digital mobile devices (e.g., Smartphones, Tablets, etc.) cost several hundreds of dollars apiece makes it a profitable business for fraudsters that invest efforts and creativity to execute this fraud using multiple methods.

    One of the most prominent forms this fraud takes place is Credit Muling.

    The practice of committing credit muling is simple: The fraudster convinces a person (the “mule” or “secret shopper”, usually from a low social economical background) to provide him with high end mobile devices in return for a payment (usually a small amount, approx. $50-100) for each device this person provides. The “mule” is then instructed to sign a contract plan through one of the local telecom operators, then pay a small upfront payment and a minimum deposit and get a subsidized premium device. The device is then handed to the fraudster, leaving him with a high end mobile device that cost him couple of hundreds of dollars (and sometimes even less). From this moment on, the path to selling this device on the black market or abroad is very short.

    A simple calculation proves that after all out of pocket expenses, the fraudster still gains substantial profit of several hundred dollars for each device he sells, leaving the telco with invoices issued and sent to the mule, who is instructed to claim that he is a victim of ID theft fraud and not willing to pay the charges.

    This form of fraud has been discussed by CSPs in North America more and more over the past year (for example, Verizon raised it during the last CFCA conference held in Philadelphia, or other publications on behalf of Sprint mentioned that they "witnessed increased credit muling problems…").

    See example in http://9to5mac.com/2014/04/25/iphone-traffickers-convincing-poorhomeless-to-sign-contracts-at-apple-store-video/

    How can operators reduce exposure to credit muling fraud?

    There are several measures operators can take to reduce their exposure to credit muling fraud:

    • Internal training and employee awareness
    • Credit checks with external credit bureaus that may identify reliability issues
    • Implement stricter authentication procedures
    • Demand higher deposits when dealing with suspected applicants

    Preventing and detecting credit muling fraud using a Fraud Management system

    An open architecture  Fraud Management System  allows operators to  integrate with  external sources of information (such as credit bureaus) that can help them prevent this type of fraud.

    Even in cases where the fraudster eventually manages to work around the operator's authentication procedures and to get the premium device, a rich set of advanced detection engines can give the operator early detection capabilities of Credit Muling fraud scenarios. Issues like 'Silent SIM cards', 'Immediate Roamers' and 'No calls to HPLMN/Contact Phone number' may indicate a credit muling fraud and can be easily detected by such system.

    ¹ Source: CFCA "2013 Global Fraud Loss Survey"

    Dror Eshet
    About Dror Eshet Dror Eshet works as FraudView® Product Manager at cVidya
    More information : http://www.cvidya.com/