Fighting Theft/Fraud of Cell phones & More Using Cloud/Big Data


How big is the issue of mobile device theft and fraud? In the U.S. alone, there are over 1 million reported cellphone thefts annually, and the number is growing (and thefts are widely believed to be under-reported.) The FBI is said to estimate that over 10% of all thefts are of mobile devices, while the FCC believes that this number rises to 40% of all types of thefts in major cities. And the problem is clearly greater in a number of other countries around the world.

Exacerbating the theft and fraud problem, is the dramatic growth in the re-sale market for mobile phones. The re-sale market is estimated at about 120 million units as of 2015, about $17 billion in transactions (per Deloitte Global). Sanford C. Bernstein has estimated that by 2018 it will represent 8% of total smartphone sales up from 3% in 2012. The surging rate of used phone sales means more transactions that need to be verified.

A key indicator of the theft and fraud problem is the growth in cellphone insurance plans, offered by carriers and independent insurers. Global revenues for phone insurance have been estimated at $50 billion for 2016 (per MarketResearch group.) Mobile phone insurance provider Asurion states that they cover about 19 million lost or stolen phone claims in a year.

A private company, Recipero, has honed a strategy to assist in dealing with this growing issue. The company has amassed a huge, unique set of databases of cellphone identification numbers (IMEIs – International Mobile Equipment Identity code, unique 15- or 17-digit code for each device – or similar identifiers depending on the exact type of phone) and transactions.

We spoke recently with David Dillard, Managing Director – Americas, for Recipero about the market outlook for this area that is a major factor in mobile development in many countries. According to his company’s data: 1 of 20 smartphones are found to be in improper hands; 7% of consumers have had a smart device stolen.

Developing Unique Data Assets

Dillard, who is an old friend, explained that there is a wide range of parties that have an interest in verifying the ownership of a cellphone, including:

  • Carriers
  • Insurers
  • Recyclers/resellers
  • Retailers
  • Law enforcement
  • Consumers

What is clear is that identifying and abetting recovery of lost or stolen property, much less preventing theft or fraud, is a matter requiring Big Data and Cloud resources.

The issue is that the information about phone theft or loss is highly dispersed. Therefore a massive data collection and organization effort is needed. Furthermore, there is a multiplicity of situations that may involve such phones, so that different types of online services may be required.

Example: Mobile Carriers – Dealing with Varying Theft/Fraud Issues

Recipero explains how the needs of different parties in interest require different types of services for different situations. As one example, for carriers, they point to a number of different offerings which they maintain:

Point Of Sale

A carrier may be repurchasing a phone or offering a trade-in. Dillard’s company offers a service that has gained considerable recognition in the industry, called CheckMEND. It allows a subscriber to check on the status of a given device, before effecting a transaction and is typically used at the point of sale.

Sprint, which has used the service since early 2014, has stated to the FCC: “The CheckMEND database is the most complete international listing of lost and stolen mobile devices available, comprised of data from major wireless carriers and law-enforcement entities globally.” (Letter to Thomas Wheeler, Chairman FCC, 1/30/15.)

Insurance – Point Of Claim

In another situation a carrier may be asked to pay on an insurance claim. Recipero has a service, ClaimsCheck, which operates at “the point of claim.” Using massive data resources, it can determine: whether an allegedly stolen phone has been blocked from service by a carrier; does the serial number check; has the device previously been sold; is any other insurer involved with the phone.

Monitoring Payment Plans

Another service, FraudWatch, is optimized for situations involving possible fraud on phones that are purchased by consumers under payment plans. Recipero monitors a wide swathe of phone transactions, e.g., pawnshops, traders, auctions, and can inform the carrier if the serial number of a phone shows up that the carrier has sold under a payment plan.

Inventory Loss

StockWatch is another service, which helps carriers, or other phone distributors, to find out if a phone that they have listed as being in their inventory, shows up in activity elsewhere. This service can help guard against loss due to dishonest employees or others.

Similar to these examples of services designed to meet typical situations arising for carriers, the company has developed a number of other services crafted to meet the situations typically arising for the whole range of other parties in interest, from commercial companies, to law enforcement, to consumers.

Enterprises’ Growing Problems with Device Losses

Another market segment that has growing interest in cellphone fraud and theft detection, in addition to those on the list above, is that of Enterprises. While the popular view may associate cellphone theft with “snatch and run” incidents in crowded cities, the problem exists, and is growing, for enterprises as well. An organization called the Association of Certified Fraud Examiners (ACFE) is devoted to fighting fraud, and has estimated that total procurement fraud may be as high as $2.9 Trillion.

A growing portion of this involves fraudulent cellphone procurements. As an increasing number of enterprises have reacted to the chaos caused by BYOD (bring your own device) by deciding to provide mobile devices for employees, it is obvious that this is a fertile ground for procurement fraud. (See e.g., “Cell Phone Fraud: Who’s Watching IT?” 3/4/16.) The techniques for employees in procurement to cheat their employers, have been well-documented by the ACFE. This dishonest activity benefits from the rapidly growing market for phone re-sales, affording the crooks outlets for their merchandise.

Dillard noted enterprises as a strong potential growth market for anti-fraud database services. He mentioned one large global shipping company, which, when shipping large orders of mobile devices, registers all of the IMEIs. If any devices disappear, they can then trace where the breach occurred.

Government & Industry Groups Roles

Governments and industry groups have taken some note of the theft and fraud issues. The major thrust to date appears to have consisted of getting carriers together to block service on any phones that have been reported as stolen or missing by the rightful owners. Prodded by the FCC, the major cellphone carriers in the U.S. agreed on a plan to disable such devices. After several years, the plan apparently became operational in 2015.

The global carrier association, GSMA (GSM Association) also offers a look up service, GSMA Device Check, “whereby operator sponsored industry stakeholders can check a mobile phone or device against the GSMA’s registry of lost and stolen devices based on its IMEI.” Access to this database is strictly limited to carriers and other interested parties, defined as: “mobile insurers, device recyclers, authorized dealers, repair centers, law enforcement agencies, regulatory bodies or national interest groups and an operator sponsorship must be obtained.”

Our Take

Unfortunately, theft and fraud are not going away and as more mobile devices appear with greater capabilities and higher value – and as the re-sale market grows – these nagging problems will undoubtedly grow. So there appears to be runway for considerable growth just in the area of helping to monitor and prevent theft and fraud of mobiles.

This is an excellent example of the need to use cloud, mobile and other capabilities to address an area of increasing importance as the information society continues its relentless expansion. Fact is that the hackers, con artists and thieves constantly become more and more sophisticated and experienced in how to prey on this new society.

We have serious reservations about how effective government sponsored attempts will be in providing the range of services needed. In general, governments are out of their depth in trying to provide flexible big data services in the digital age. For example, it has taken years for the government to prod carriers to block service on stolen cellphones. However, even this service is highly limited because it depends on the rightful owner reporting the incident

Furthermore, while theft is a crime, it’s well recognized that reporting a cellphone theft to law enforcement is a pretty futile gesture. Police simply don’t have the resources to deal with such small incidents. This is illustrated by a Recipero service, Record My Loss, a lost property recording service developed in the UK, which was just launched across the U.S. in July 2016. (The reports are linked into a broader database that the company maintains for law enforcement agencies.) It’s interesting to note that the Avon & Somerset Constabulary in UK with whom Recipero originally developed the program actually acknowledged: “This process is much more effective and efficient than reporting the loss directly to us.”

One of the other aspects of this business area that interests us is that the big data collection and cloud-based services of this type can be extensible in the future to some other very large areas. One example would be other lost or stolen electronic devices or appliances. Recipero, for example, already offers a service, called Immobilize, for consumers to register items of property, including mobile devices, in a Recipero-maintained database. The company states that there are over 34 million items registered in the U.S. and UK Immobilize databases.

Another Recipero service called Trace Checker is maintained for the US Government. It holds millions of records of stolen property from over 18,000 law-enforcement agencies in the US and is integrated with the FBI. Recipero states, “The breadth of items listed is extensive ranging from fine art and antiques to technology devices such as mobile phones and laptops.” Anyone can use the service for free, to check on a used item they are contemplating buying.

Another area of growth that may blossom in future years is protecting against theft and fraud of devices that are part of the IoT. In this case, the growth potential may depend, in part, on the unit value of devices that require tracing.

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