''Identity Theft'' Tops List of Telecom Fraud, New TRMA Industry Study Shows; Carriers to Collaborate in Industry-Wide Effort to Fight Fraud at Frontlines.

Business Editors/High-Tech Writers

PARSIPPANY, N.J.--(BUSINESS WIRE)--March 31, 2004

A new survey of the country's leading telecommunications carriers released today reveals that "identity theft" is the leading type of fraud afflicting the industry. In response, major carriers are joining to fight the problem in an industry-wide campaign.

The Telecommunications Risk Management Association (TRMA), a trade organization created by the telecommunications industry to reduce risk and bad debt, sponsored the study. Most of the major U.S. telecom carriers are members of TRMA and a majority participated in this recent survey. TRMA periodically conducts member surveys on important industry issues.

The recent poll, which was completed last week, represents the first step in a comprehensive campaign by TRMA to quantify the impact of consumer fraud on the telecommunications industry and to spearhead an aggressive industry-wide effort to control the problem. Telecom operators have been fighting fraud on their own for some time. But this new campaign aims to identify and deploy "best practices" through open collaboration, information sharing, and education among the major carriers.

In late September, the Federal Trade Commission (FTC) issued a report estimating the cost of identity theft to businesses and consumers at $47 billion, annually. According to the FTC, nearly 10 million individuals were victims of identity theft in the last year alone. The personal cost to these individuals was estimated at $5 billion, with the average person spending approximately 30 hours to resolve problems that resulted from the theft of their identity.

"These numbers are the real thing," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "For several years we have been seeing anecdotal evidence that identity theft is a significant problem that is on the rise. Now we know. It is affecting millions of consumers and costing billions of dollars. This information can serve to galvanize federal, state, and local law enforcers, the business community, and consumers to work together to combat this menace."

Cyberspace Criminals

Among its top findings, the TRMA study shows that carriers are increasingly challenged by the growing sophistication of fraudsters who now exploit the Internet to create new fraud schemes. According to Betty Plocharczyk, chairperson of TRMA's Fraud Management Committee, "Fraudsters are creative criminals. For them, the Internet is a new frontier. It's a virtual goldmine of personal information that fraudsters can easily access and then use to create false identities," she explained. "Once they have established a false identity, they can use it to obtain all kinds of products and services."

When asked what types of fraud they expected in the near future, a majority of telecom providers cited vulnerabilities created by online sales of products and services as their top concerns. "Again, we are seeing challenges posed by the Internet," Plocharczyk explained. "Fraudsters can capitalize on the anonymity that the Internet provides, and we can expect to see them exploit this aggressively."

Technology: First Line of Defense

As the Internet increasingly becomes the preferred playground for fraudsters, technologies that detect identity theft and reduce losses have become more robust and effective in fighting the problem. Many operators are deploying advanced fraud management systems, which, they say, are sharpening their ability to attack this costly and pervasive issue.

In terms of current strategies to fight fraud, the TRMA poll reported that two-thirds of the carriers surveyed use fraudster databases, personal verification, and pre-paid systems as their primary lines of defense against fraud.

In addition to technology solutions, operators partner routinely with law enforcement and government agencies to provide information and share intelligence. A number of cooperative initiatives are currently underway, including the development of toolkits for victims of identity theft and industry/law enforcement collaboration surrounding the investigation and prosecution of suspected identity thieves.

Plocharczyk says that her committee's goal is to have members share their knowledge, protocols, and experiences in an effort to present a unified industry front against fraud. "Fraud is a big problem for the entire telecommunications industry -- second only to the credit card industry," she explained. "By working together, we believe we can close many more doors to fraudsters."

As a result of the survey's overall findings, Plocharczyk said that her committee would immediately begin work to identify the best strategies, technologies and information sharing programs that can result in better fraud detection, containment, and management for the industry.

State and Federal Governments Eye Identity Theft

Identity theft also has emerged as an important issue on Capitol Hill and in many states affected by the issue.

In October, the House of Representatives passed a resolution requiring credit bureaus to provide consumers with a free copy of their credit report -- every year. This measure would enable consumers to quickly identify unauthorized accounts, address changes or other irregularities that are common markers of fraud. The U.S. Senate passed a similar bill in early November. The White House is expected to support both pieces of legislation.

A majority of state legislatures also are tackling identity theft issues through a myriad of proposed laws aimed at restricting access to personal information, providing information proactively to consumers, and adding additional safeguards to ensure the identity of individuals engaged in a financial transaction. Some proposed bills would require credit grantors to verify addresses and other personal information or enable consumers to freeze access to their credit files. Others would require credit-reporting agencies to alert a consumer whose identity may have been used fraudulently without their consent. Among the states most aggressively pursuing consumer protection legislation in the area of identity theft are California, Illinois, New York, New Jersey, Texas, and Vermont.

The FTC also is stepping-up its focus on identity theft prevention through, among other initiatives, a comprehensive web site aimed at educating businesses and consumers about the problem. For more information--and for direct links to the three major credit-reporting agencies--visit the FTC's Identity Theft website at: http://www.consumer.gov/idtheft.

About TRMA

The Telecommunications Risk Management Association (TRMA) was formed in 1997 by telecommunications industry executives to explore cooperative efforts to reduce uncollectible debt from consumers and small business.

TRMA is an industry forum for risk and fraud management. It brings together risk management professionals who seek to better understand issues and cooperate on industry wide initiatives to address bad debt and fraud within the telecommunications sector. TRMA promotes cooperation among industry members for the benefit of the industry, its members and their customers. For further information, please contact TRMA at [phone], or visit the association's website at: http://www.trmanet.org.