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Cyber Crime: The Impact of Telephone Toll Fraud on Small Business


 

Cyber Crime Telephone TollIn our previous blog, we discussed the need to review your Cyber insurance policy to fully understand the coverage you have and close any potential gaps that may exist. The insurance market, as innovative and responsive as it has been over the years in addressing the emerging risk of cyber and the nefarious and creative ways hackers get at data, is still evolving in this area and continually developing new products to respond to today’s risks. One such risk that businesses should be aware of is telephone toll fraud and if and how Cyber or Crime insurance policies cover this exposure.

Telephone toll fraud involves the hijacking of a phone system over the Internet to dial out to premium numbers in distant countries at several dollars a minute. According to the Communications Fraud Control Association, an industry group financed by carriers and law-enforcement agencies to tackle communications fraud, toll fraud cost small businesses $4.73 billion globally in 2013, up nearly $1 billion from 2011.

How does a typical scheme work? In an article in the New York Times, telecommunications fraud experts explained it this way: Hackers sign up to lease premium-rate phone numbers, often used for sexual-chat or psychic lines, from one of dozens of web-based services that charge dialers over $1 a minute and give the lessee a cut. In the U.S. premium-rate numbers are easily identified by 900 prefixes, and callers are informed they will be charged higher rates. But elsewhere, such as Latvia and Estonia, it can be more difficult to spot. The payout to the lessees can be as high as 24 cents for every minute spent on the phone. Hackers then break into a business’s phone system and make calls through it to their premium number, typically over a weekend, when nobody is there to notice. With high-speed computers, they can make hundreds of calls simultaneously, forwarding as many as 220 minutes’ worth of phone calls a minute to the pay line. The hacker gets a percentage of the charges, typically delivered through a Western Union, MoneyGram, or wire transfer.

Some examples of victims of this type of fraud:

  • A seven-person architect firm in Georgia got a phone bill for $166,000 for a single weekend in one month. It was discovered that hackers routed these from the firm to premium-rate telephone numbers in Gambia, Somalia, and the Maldives.
  • A dry cleaners operating in three states was the victim of hackers who placed more than 75,000 minutes of premium calls, totaling $147,000.
  • A consulting firm in Albany received a bill of $200,353.

There are measures small businesses can take to help minimize their exposure to this type of fraud including: ensuring that the phone company you use will protect you against fraudulent charges, but this may mean going with one of the large carriers; having an IP phone system platform configured to restrict international and directory assistance calls, or to require an authorization code for such calls; protecting IP phones behind a firewall and not used on public or untrusted networks; the use of strong passwords that are updated every 90 days; and subscribing to usage reports.

Additionally, talk to your insurance advisor to see whether you have coverage for this type of cyber risk. In some cases a Crime policy may be endorsed to include this coverage. There are also Cyber insurance policies for small businesses that cover this type of exposure but it is important to check. Axis Insurance Services specializes in Crime and Cyber Liability insurance and can review your policies to determine the extent of your coverage. Just give us a call at (877) 787-5258.

Sources: NY Times, E-Commerce

 

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Blogged on: January 25, 2016 by Mike Smith
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