ByPass FraudE x e c u t i v e S u m m a r y

Interconnect Fraudhas a clear „business model“ that you are likely already familiar with. Itrequires a legal entity to have interconnect agreements, plus a highinvestment in equipment. But the „return“ is high too. Your company canlose millions of Euros through one fraudulent partner.

GSM Gateway Fraud activity, to the contrary, requires a very small investment. Any of yourprivate or corporate subscribers can do it with inexpensive and easy-to-use devices. Your loss on one account is likely to be moderate, but do yourealise how widespread this problem is? Even if your Fraud Management or Interconnect Billing system is able tohandle Interconnect Fraud, a new mindset is required to combat GSMGateways. �

Interconnect and GSM Gateway FraudBypass Fraud is one of the latest and most severe threats to a telecom operator’srevenue. It is often thought to be under control – but never underestimatethe creativeness of 1 billion subscribers!

What is it? Bypass Fraud is an unauthorised manipulation or exploitation of an operator’s network. This problem has been evidenced in two areas: the first is themore commonly known Interconnect Fraud and the second is the newer, and less familiar, GSM Gateway Fraud.

GSM Gateway Fraud is a new problem evolving new „business models“.The very low level of set-up costs permits todeploy it almost anywhere from small villagecommunities to large corporate accounts.

How does it work? Gateway bypass has different forms –international vs. national, incoming vs. outgoing,border bypass etc. – but the idea is simple:bypassing interconnect points via cheaper routessuch as the Internet.

GSM GatewayFraud Illustrated

Figure 1 | International Bypass scenario

A call via a legitimate route would normally cost 0.8 with an initiation fee of 0.5 in country A and

a termination fee of 0.3 in country B.

In case of a bypass call via VoIP the initiation fee is 0.15 and the termination fee is 0.05.

The mobile operator in country B loses 0.25 (0.3-0.05) in termination fees, which results in an

83% loss.

International Bypass Example

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A GSM Gateway is a device containing SIM cards. By interfacingwith landline telephone equipment such as PBXor the Internet it provides instant access to aGSM network.

GSM Gateway Fraud occurs when call resellers use GSM Gatewaydevices to transform „fixed-to-mobile“ calls to„mobile-to-mobile“ calls. The affect of thisactivity is that traffic delivered to GSM opera-tors by unlicensed carriers is billed as internalrather than interconnect traffic. GSM operatorsonly receive the value of on-net calls and donot receive the interconnect fee for call termi-nation, which results in revenue loss.

Is it illegal or not? Regulations can vary from country to country,but as a rule of thumb: legal if users belong tothe same subscriber account and illegal if ser-vice is provided for a fee to others.

A usual mistake is to underestimate the impactof Gateway Fraud on your revenue. The loss onone call is minimal but the number of gatewaysis rapidly increasing all over the world. And ofcourse, not only international call cases arebypassed.

Figure 2 | National Bypass scenario

A regular fixed-to-mobile call would cost 0.25 with a call initiation fee of 0.15 and a termination fee

of 0.1.

A bypass route via a GSM Gateway allows for the same call to be terminated at a rate of 0.05, therefore

the mobile operator loses 0.05 (0.1 - 0.05) in termination fees, which is a 50% loss.

National Bypass Example

Interconnect Bypass Detector

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