Traffic Pumping Fraud Hits Seven-person Firm

Small companies beware: telephone traffic pumping fraud has no mercy, especially for the little guys.

A seven-person architectural firm in Atlanta has learned thehard way and is fightingback. Earlier this year fraudsters hacked their phone system one weekend and generated $166,000.00 in long distance charges.

Their long distance provider, TW Telecom, has a system to detect fraudulent calls, but the system was down for 44 hours. During that time, the fraudsters repeatedly called seventeen telephone numbers in Gambia, the Maldives and Somalia. Most small businesses do not realize that with today’s technology, fraudsters can use a single telephone to generate dozens or even hundreds of simultaneous, high-cost telephone calls.

TW Telecom is threatening to sue the seven person architectural firm if they do not pay up. In fact, the amount has now increased to $190,000 because of late fees and a disconnect fee because the firm has since switched telephone service providers.

Unlike credit card services, telephone service providers have no responsibility to protect their customers from fraud. This business model may have made sense twenty years ago, but today’s technology takes the risk of fraud to a whole new level. The fraud risk is greater and the techniques to protect a small enterprise phone system are more complex.

More importantly, a whole new ecosystem has developed that creates a huge incentive for traffic pumping fraud. This ecosystem has two components:

  1. Widespread software tools that make fraudulent traffic pumping easy
  2. The proliferation of international premium rate numbers that provide a quick easy way for fraudsters to receive cash payment for their traffic pumping.

In this case, the fraud victim recognizes the telephone business model is fundamentally flawed and is fighting back to make changes that will benefit all consumers.

In the telephone business model, there must be a flow of revenue from the customer to the final network provider that completes the call to the called party. Every network in the path of an international call must get paid something for their effort. This is a fair and reasonable business model that encourages growth and innovation in telecom services.

However, if traffic pumping fraud is going to be stopped, the incentive for fraud must be removed. The transfer of cash payments from the call source to the final destination - the premium rate number holder -must be stopped when obvious traffic pumping occurs to remove the incentive for fraudulent traffic pumping.

Arguing this commonsense idea, that criminals must not be allowed to profit, is the architectural firm’s goal. They are filing a complaint with the FCC that TW Telecom is in fact aiding and abetting telecom fraud by transferring funds for obvious traffic pumpingto the next network in the chain of telephone networks that carried the call to Gambia, the Maldives and Somalia. By making this payment, TW Telecom is in fact party to the fraud.

Like most small business owners, it sounds like these architects understand that you get paid for doing a good job and you get in trouble when you cheat customers. But this is telecom, whether their argument will win the day with the FCC will be determined soon. This could be a watershed moment in telecom which is being threaten by a rapidly growing problem of traffic pumping fraud.