New EU regulations may result in increased SIM Box Fraud

New EU regulations may result in increased SIM Box Fraud

From June 2017, mobile roaming charges will be completely abolished within the EU, meaning consumers will be charged the same rate for using their mobile phone in the EU as they would be if they were at home. Whilst this landmark announcement is great news for mobile phone users, the new regulations could have a dramatically negative effect on the wider industry, and lead to a significant increase in fraud against mobile network operators.

With most EU operators now looking to increase termination rates for mobile calls to the rest of the world—in a bid to recoup some of the lost revenue from the reduction in EU roaming rates— it has created even more opportunities for fraudsters and criminal gangs to use SIM Box Fraud to hijack legitimate calls and pocket the subsequent revenue.

SIM Box fraud is already a massive problem for the mobile industry, with some analysts predicting it to be worth $3 billion a year in lost revenues for the network operators. The practice is most prevalent in places where fraudsters can exploit the difference between high interconnect charges for international calls and low retail prices for local calls. This type of fraud works when scammers install a SIM Box—otherwise known as a GSM Gateway—and fill it with multiple low-cost prepaid SIM cards which are then connected to the internet. The fraudsters are then able to hijack and terminate incoming international calls whilst making them appear as if they are local calls, bypassing all the associated call charges and government taxes.

Aside from the financial impact this has on both network operators and the wider industry, it often results in poor call quality for end users. Moreover, by disproportionately increasing the traffic for local calls in an area, the fraudsters cause congestion which negatively affects the overall performance of the network for genuine local traffic.

The industry has seen dramatic increases SIM Box fraud before. In October 2014, telecom operators in East Africa agreed to cut roaming charges in the region, essentially making cross-border calls between countries like Kenya, Rwanda and Uganda much cheaper. However, soon after operators noticed a significant rise in the volume of international calls being terminated in these countries but a subsequent drop in income—resulting in a loss of $65 million in associated revenue to local operators.

An example of the scale of this issue is demonstrated by the Ghanaian government, which announced that SIM Box fraud alone had cost it $5.8 million in stolen taxes. At the time of the announcement it was estimated that each individual SIM card being used to fraudulently terminate calls was costing the industry $3,000 per month in lost revenue.

Whilst fraudsters have the ability to purchase readily available GSM gateway hardware, preventing SIM Box fraud has proven difficult. With the new regulations due to come into force in the EU next year, consumers, network operators and governments all need to be aware of the fraud and invest in technologies to stop it continuing.

New EU regulations may result in increased SIM Box Fraud