US making a dent on cellular fraud

The US is having some success in the crackdown on cellular thieves, but overseas, it is another story.

The US is having some success in the crackdown on cellular thieves, but overseas, it is another story. The international arena looms as the next frontier for fraud, say experts at a recent technology conference here.

Last month, two felons were ordered by a Los Angeles Superior Court to pay the largest restitution in history to a carrier for cellular fraud. Vage Patatanyan and David Younesi owe AirTouch Cellular more than US$560,000 for calls made by phones they illegally programmed with legitimate customers' phone numbers.

The Cellular Telecommunications Industry Association (CTIA) hailed the sentence as another example of stiffer US penalties finally beginning to deter criminals. But the CTIA estimates that the US alone still loses US$1.7 million each day to cellular thieves. These huge sums become carrier overhead that eventually flows through to user bills.

But panelists at the TEK-21 conference earlier this month, hosted by Cincinnati Bell Information Systems, say that phone-cloning operations larger than anything seen in the US are in full swing in off-shore locations -- places where US-based multinationals are setting up shop and buying cellular service. Foreign governments have just not been aggressive in bringing criminals to justice, they say, and the panelists are urging carriers here to trade education and fraud-prevention technologies with overseas phone companies.

Michael Guidry, chairman of The Guidry Group, an investigative firm in The Woodlands, Texas, says he recently went undercover to a plant in Taipei, China. He says he was astounded to see an entire operation devoted to building cell phones that get illegally programmed by a paid engineering staff and then sold on the black market.

Johnson says that, aside from phone cloning, wireless hijacking is going on in Latin America. "A super-strong transmitter picks up your signal, puts it on hold for a moment, then makes a three-way call," he says.

The US has made great strides in combatting cellular fraud. The Los Angeles decision, for example, follows legislation signed in May in Maryland that clearly makes it a crime to possess, use or distribute a cloned telephone. The law is to take effect at the start of October.

Lee Kaywork, CTIA vice-president of toll-fraud prevention, acknowledges, though, that "fraud prevention has been at the expense of user convenience". Users often must employ personal identification numbers to authenticate themselves. In addition they frequently find their roaming capabilities shut off and are asked instead to use calling cards.

Still others must deal with paranoid carriers. One cell phone user has complained on the Internet, for example, that AT&T Wireless Services immediately shut off his service when he made a call to Jamaica from the US because the carrier suspected fraud. He requested that AT&T allow him to pre-authorise certain area codes he could call without hassle, but the company refused.

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