Companies take action over telecoms fraud

silicon.com can exclusively reveal that new measures being drawn up by the Communications Managers Association will insist that network security takes greater priority in any corporate telecoms supply. The CMA is pushing for telcos to bear the brunt of any loss incurred when a hacker accesses the corporate network.

Telecoms fraud is a growing problem worldwide. Mitsubishi, for example, lost $430,000 in 1991 after a hacker accessed its telecoms network and re-sold the calls. In a more recent incident, a UK company lost £180,000 in one weekend. According to the CMA, global figures for fixed and cellular related fraud will rise to £26.5bn per year in 2002.

In cases such as these, the end user rarely gets compensation as it's a highly complex technical process to determine where the fault lies and is often put down to the negligence of the end user. However, as the threat of telecoms fraud grows, and as more companies adopt mobile working practices, communications managers want an end to ambiguity.

Anthony Riem, partner at specialist commercial fraud legal firm Philippsohn, Crawfords and Perwald, explained: "They want to ensure that a benchmark of security is in the contract of supply and that security is a fundamental feature set out in the invitation to tender. They will get a certificate from the supplier and if a fault happens at the interchange it will be the supplier that is responsible not the end user."

Greg Smith, chairman of the fraud forum for CMA, argued that although security is only sold as an add-on feature, telecoms companies increasingly demand that a company prove it has 100 per cent security on its network before it pays out. By changing the contracts, the CMA hopes to balance out this negotiation process.

But phone companies are unlikely to take on added risk without charging a premium for the service as they already incur huge losses through fraud. According to the International Forum of Irregular Network Access (FIINA), some companies lose as much as six per cent of revenue.

However, Tom Wills-Sandford, director of communications at the FEI (Federation of Electronics Industry), argued that end users stand a good chance of getting their way. "At the end of the day, these companies have the power to not sign contracts unless their terms are met."