Ways to combat telecom fraud

Some cases of Southeast Asia-based telecom fraudsters targeting Chinese victims have come to light of late. Telecom frauds have inflicted considerable damage on society, affecting victims from various backgrounds. To combat transnational telecom frauds that specifically target Chinese individuals, it is crucial to adopt a comprehensive governance approach.

Cooperation

To begin with, it is important to strengthen international judicial and law enforcement cooperation with countries where telecom frauds are rampant. For instance, signing extradition treaties with other countries would facilitate the arrest and extradition of such fraudsters to China for prosecution. By strengthening cooperation among the law enforcement departments of different countries, including information exchange, investigation, evidence collection, detection, and recovery of ill-gotten money, governments can sever the cross-border telecom fraud chain.

Telecom fraudsters rely on illegally purchased personal information to defraud people. The fraudsters use personal information to register phone and bank cards, which serve as essential tools to commit telecom frauds. They also commit frauds by illegally purchasing other information related to logistics, finance, loans, transactions, marriage status, healthcare, education and training of different entities.

Since protecting people’s personal information is critical to eradicating telecom frauds, the authorities should ensure personal information handlers comply with the laws on personal data protection, such as the Personal Information Protection Law, and establish internal preventive mechanisms to safeguard personal information and prevent its misuse by fraudsters.

A robust accountability system

There is also a need to establish a robust accountability system to prevent the illicit sale of personal information to criminal gangs, and hold personal information handlers accountable in case of information leaks. In such cases, law-enforcement officers handling telecom fraud cases should conduct investigation to determine how the personal information used by criminal gangs were leaked and hold the concerned information handlers responsible.

The prevalence of telecom frauds can be partly attributed to the lack of strict intra-institutional supervision, which has enabled fraudsters to carry out scams.

Overseas fraud groups use SMS services provided by China Mobile, China Telecom and China Unicom to send fraudulent messages in bulk to users, enticing unsuspecting users into their trap. By reinforcing internal prevention and control mechanisms, and more strictly scrutinizing text messages sent from high-risk overseas locations, telecom service providers can significantly reduce such incidents.

Similarly, internet search engines can play a role in combating such crimes, by scrutinizing/censoring paid advertisements, and installing devices or apps to prevent users from accessing fraudulent websites. And by improving internal prevention and control mechanisms, and strengthening the monitoring and handling of abnormal accounts and suspicious transactions, banking institutions and non-bank payment service providers can help mitigate telecom frauds.

The new Anti-Telecommunications Network Fraud Law

To combat telecom network frauds, it is imperative that all stakeholders, including telecom business operators, banking and financial institutions, and non-bank payment service and internet service providers familiarize themselves with the new Anti-Telecommunications Network Fraud Law. Also, if a telecom fraud is committed, law enforcement agencies should investigate whether the sectors mentioned above lack proper anti-fraud mechanisms and hold them accountable for any lapse.

Measures should also be taken to make the public, especially vulnerable individuals, more aware of common telecom frauds, by sharing classic fraud cases with them. And universities, residential communities and village committees should disseminate detailed information on such cases, helping people to be vigilant against fraudulent schemes.

According to the Ministry of Public Security data, five types of frauds account for nearly 80 percent of all telecom fraud cases. They are rebate scams, false investment and financial management schemes, fake online loan programs, and impersonation of customer service representatives and law enforcement officers or judicial officials.

Rebate frauds are the most common, making up about one-third of all cases, while false investment and financial management frauds account for the largest share of defrauded amount, about one-third of the total.

Therefore, the authorities should focus on raising people’s awareness about the distinctive characteristics of the five common scam types. By conducting timely and effective multi-channel information campaigns against telecom frauds, the authorities can help enhance the understanding of individuals about the fraudulent tactics used by scamsters, thus enabling them to identify fraudulent schemes and reducing the likelihood of their falling victim to deception.

In short, the authorities should implement comprehensive measures to nip telecom frauds in the bud.

About E. J. McKay

E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.