It is the downside of the telecom boom in Africa. As telecom services multiply and upgrade, telecom fraud is gaining ground across the continent, depriving states and mobile network operators of significant revenues. Data technologies are the key weapon in tackling this issue, and will enable States to fight against these revenue losses at a particularly crucial time of economic challenges wrought by COVID-19.

Telecommunications specialist and independent author Suzette Plantema.

Over the last decade, telecommunications services have expanded rapidly throughout Africa, bringing with them many socio-economic benefits for the countries of the continent, for governments as well as the populations. Indeed, governments are increasingly harnessing the telecom sector as a robust source of revenue for the national budget, and citizens are provided with drastically improved access to information, among other advantages. However, this expansion of telecom services has also attracted the attention of criminals eager to cash in on it, so much so that Africa is now seen by operators around the world as one of the world’s telecom fraud hubs, and that it loses an estimated US$150 million to fraud every year.

SIM boxing, a serious financial and security threat

SIM boxing (also known as bypass fraud), call masking, SMS and signalling fraud are among the most common types of telecom fraud. Due to their increasing complexity and ingenuity, these fraud schemes represent a serious financial and security threat for mobile users, operators, governments and the relevant regulatory institutions.

According to a joint report published in March 2019 by Europol’s European Cybercrime Centre and Trend Micro, a Taiwanese cybersecurity and defence company, US$32.7 billion are lost every year worldwide as a result of telecom fraud. The Sub-Saharan mobile markets are among the most affected. Since 2010, for example, Ghana has lost more than $100 million as a result of fraudulent SIM boxes.

According to the Nigerian Regulator (NCC), Nigeria is losing around $60 million each year due to SIM boxing, call masking and refiling. The consensus among experts is that technological developments have contributed towards the increase in bypass fraud. For instance, SIM boxes can now be programmed to replicate user behaviour: one SIM box can operate with many gateways located in different regions and this facilitates fraud escalation.

Controlling fraud through data technology

There is also increasing awareness and agreement among the relevant authorities that these technological advancements are also part of the solution to better regulate the sector. A variety of digital solutions are currently available to governments and regulators eager to advance their fight against cybercrime, including telecoms fraud. These solutions have the capacity to ensure network security, protect digital identities and fight counterfeit and non-compliant devices. They also prevent and counteract telecom fraud and other criminal activities in the mobile ecosystem.

However, the adoption of such technologies on the continent is not yet widespread, which means that African governments and regulatory authorities still lack the digital tools that would enable them to effectively oversee and regulate the telecom market in their respective countries by providing them with the accurate and comprehensive data needed to control fraud and improve overall compliance. As a result, the mobile ecosystem is increasingly exposed to a number of critical risks and contingencies. Zimbabwe, for example, has lost over US$3 billion to illicit financial flows through tax evasion, smuggling, corruption, fraud, drug trafficking and money laundering.

Major revenue losses

Nevertheless, having understood that the countering of fraud was crucial to the health and dynamism of their telecom sectors and economies as a whole, and driven by the push towards digital transformation, a number of African countries have chosen to acquire IT-based fraud management systems with very positive results. In Tanzania, for instance, the Telecom Traffic Monitoring System is regarded as a national success story, having helped the local regulator reduce the rate of fraud on international calls from 65% to 10% within the last five years.

In Ghana, the fraud management system that was implemented at the end of 2018 enabled the National Communication Authority, the Revenue Authority and the Ghana Police Service to dismantle a SIM Box syndicate that had cost the Ghanaian Government nearly 2M US$ per month in both revenue and taxes.

The antifraud capacities of these technological solutions have also been proven in African countries other than Tanzania and Ghana, including Congo, Uganda, Rwanda and Senegal. In Uganda, SIM boxing is a lingering menace since 2017, causing the loss of hundreds of thousands of dollars in revenues every year. In 2019, MTN Uganda, which accounts for more than half of the country’s mobile money accounts, experienced a series of mobile money fraud attacks which deeply impacted its subscribers. To curb this fraud, the UCC busted a major SIM Box network last January, where hundreds of SIM cards were being used to illegally terminate inbound international calls.

Data technologies represent a key weapon in telecom regulators’ arsenal in their fight against fraud, and by facilitating collaboration among all the market stakeholders, the use of advanced ICTs is a vital step towards constructing sustainable and safe telecom ecosystems. Centralised data technologies owned and operated by the Government’s regulatory and enforcement bodies enhance the efforts made by the individual anti-fraud solutions of each operator, and the successful results of these collective collaborative efforts are evident across the continent where centralised anti-fraud systems are employed.