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Cellular Business
September 1994 A Criminal’s Playing FieldBy Roseanna DeMaria
Cellular’s inherent capabilities make it an appealing tool for the criminal element.
Imagine returning from your vacation to discover that while you were gone, someone had been in your home running up huge bills in your name, without any way for you to track them down now that they have decamped and moved on to some other unsuspecting victim’s home.Now imagine that these nefarious strangers were not simply living the life of Riley in your house at your expense, but were actually using your home as a “mill” to package, store and sell narcotics. Fortunately, this particular dark vision is only imaginary. Unfortunately, all too often, people are being confronted with an eerie – but all too real – variation on this experience when they receive their monthly cellular phone bill. Sophisticated drug traffickers have learned the many advantages they can glean from massive, organized cellular phone fraud. American business has always been quick to pounce on each new technological marvel. Tone-only pagers have quickly given way to far more elaborate communication devices capable of receiving entire documents at virtually limitless range. Portable fax machines and computers of every size and shape give instant 24-hour-a-day access to data and information. The cellular phone provides a range of advantages never before available in the business world and has rapidly become the communication device of choice for the 1990s entrepreneur. Not surprisingly, criminals and their financiers have been equally quick to detect the benefits of this new technological phenomenon. Like all international businesses, the drug cartels and their money launderers are not restricted by geographical boundaries or by the 9-to-5 business day. In fact, for the criminal organization, the cellular phone can provide even more advantages when coupled with any kind of cellular phone fraud that conceals the caller’s identity. Instructions for the delivery of tons of narcotics can be given, or directions for the laundering of narco-dollars can be sent, all without fear of the calls being traced to their source. Not only will the criminal organization be insulated from discovery, but it will not even have to pay for the phone service that makes its crimes possible. Instead, by the time the unsuspecting victim gets the bill and discovers the scam, the narcotics organization will have latched onto someone else’s phone. Given these advantages, it was to be expected that cellular phone fraud would become an integral part of every up-to-date 1990s criminal enterprise. There are four basic forms of cellular fraud: subscription fraud, stolen phone fraud, call-sell fraud and access fraud. Subscription fraud. The illicit subscriber, either an individual or a phantom business, obtains service from a cellular carrier with false identification so that when the bills is prepared, no one can be found to pay it. Certain criminal groups have become especially adept at creating, obtaining and using forged identification in a conscious effort to defeat any subsequent law enforcement attempts to identify and locate the drug traffickers. Stolen phone fraud. The criminal steals the cellular phone itself and uses it extensively before it is reported stolen by the legitimate subscriber-victim. Although often quite costly, this form of fraud is less systematic and more an outgrowth of opportunistic street crime. It is generally not the form of fraud chosen by the more sophisticated criminal. Call-sell fraud. The criminal in this instance acts as an illegal phone “carrier” – selling individual phone calls for cash over a phone to which he has somehow obtained illegal access. This type of operation offers the consumer international and long-distance calls at bargain-basement prices. Frequently, a timer is used to limit the caller to a pre-paid time. These call-sell operations are often conducted – like street-level drug sales – with a brazen disregard for law enforcement surveillance because of the need to pull in consumers quickly before the operator’s unlawful access to the phone is discovered and terminated. Access fraud. Thus far, access fraud falls into two main categories: cloning and tumbling, each of which involves tampering with the ESN and MIN numbers of legitimate cellular phone customers. In cloning operations, the phone bandits set themselves up alongside main highways, airport parking lots and other places cellular subscribers are likely to use their phones. They then use ESN/MIN readers to steal a legitimate user’s cellular phone “fingerprint.” Today a new breed of criminal roams the streets of major cities using portable ESN/MIN readers to pirate legitimate ESN/MIN combinations for cloning, literally stealing these signals from the air. Once the numbers have been read, they are sold or passed on to a phone cloner, who programs them into cellular phones owned by, or available to, drug traffickers. A typical clone sells for about $300 and comes with a 30-day guarantee. If the carrier terminates the clone within the 30-day period, the cloner will provide a second clone to the trafficker for free. The cloner has no legal market and is simply a service provider to the criminal business world.
For criminals and their financiers, the cellular phone can provide numerous advantages when coupled with any kind of cellular fraud that conceals the caller’s identity.
Tumbling fraud is an even more sophisticated version of access fraud. It occurs when the criminal equips a phone with a computer chip that generates a different ESN/MIN combination for each call made. (The numbers are changed or “tumbled” after every call.) The numbers generally involve out-of-town carriers so that local carriers are not immediately able to verify the call’s validity. Ironically, the tracking of legitimate ESN and MIN signals to determine a phone’s location has sometimes proved useful to law enforcement – in homicides, in kidnapping cases, and recently in the O.J. Simpson case. On the other hand, these signals, which are vital to the operation of the cellular phone, also create the vulnerability to this type of fraud. The legitimate cellular phone customers, like the innocent vacationers discussed earlier, are generally unaware of this silent by effective theft until it is too late. In fact, they have no idea their phone is being used for these illicit purposes until the bill arrives at the end of the month and is loaded with phone calls they did not make. The narcotics traffickers, on the other hand, are well-aware that their stolen access has a limited life span and have usually moved on by the time that occurs. At worst, if the customer and carrier realize the cloning has occurred more quickly, the drug dealers’ access is cut off a little sooner than they may have expected (although their clone supplier generally stands ready to solve that problem). In the meantime, the fact that each clone has such a limited lifetime creates extra-ordinary difficulties for law enforcement, because the cloned phones have ordinarily been shut off by the carriers – and the traffickers have moved on to some other phone – by the time the cloned phone numbers have been identified by the police through phone analysis. Thus, through the astute use of phone fraud, the narcotics trafficker can insulate drug communications and transactions from any meaningful electronic surveillance by the authorities. Therefore, access fraud is by far the most useful form of fraud for the sophisticated criminal enterprise. Its popularity, particularly with the Colombian cartels, has made phone cloning the fastest growing form of cellular fraud, particularly in Los Angeles, Miami and New York. And this type of fraud can be extremely costly. In a recent case, a suspect was arrested for making $120,000 worth of cloned phone calls in just one month. This suspect had stolen phone numbers from New Jersey and placed the calls from Fort Erie, Ontario. The calls bounced off of a tower in Buffalo and connected with callers in Toronto for conference calls to South America. Preventive measuresCellular phone companies and law enforcement officials have been scrambling to keep pace with these phone pirates and their criminal clientele. In many cases, this has included a push for new legislation, and, in many areas, meaningful state legislation proscribing this fraud and imposing serious sanctions is still needed to heighten the success rate of criminal investigation and prosecution.
Access fraud is the most useful form of fraud for the sophisticated criminal enterprise. Its popularity has made phone cloning the fastest growing form of cellular fraud, particularly in Los Angeles, Miami and New York.
Cooperation between the cellular phone industry and law enforcement personnel has been productive and continues to be indispensable to every law enforcement initiative in this area. For instance, in 1991, the cellular industry launched a broad anti-fraud program, which has let to the arrest of more than 300 suspects and the seizure of thousands of computer chips used in this type of racket. Meanwhile, several carriers have created in-house fraud units staffed with specially trained investigators and analysts. This is a useful effort. However, it lacks the advantage of an objective, outside, independent investigative evaluation. CTIA formed a Fraud Task Force that specifically addresses the fraud problem. CTIA has sponsored nationwide training seminars and created training manuals and tapes that deal with fraud. Tom McClure, CTIA’s director of fraud, can be contacted at 202-785-0081 for further information about these resources. Inherent difficulties and future solutionsOf course, the perfect in-house fraud detection system would:
One relatively simple approach to combating phone fraud is to enlist the aid of the otherwise unsuspecting clone phone victim.
One relatively simple approach is to enlist the aid of the otherwise unsuspecting clone phone victim. Although the victim is often completely unaware of the crime, certain signs may appear to indicate that something is awry. A legitimate subscriber whose incoming callers repeatedly receive busy signals or wrong numbers should be ware of a potential clone. Similarly, if the legitimate subscriber frequently experiences difficulty in making outgoing calls or retrieving voice mail or receives several wrong numbers or hung-up calls, a clone may be at the root of the problem. A flyer to customers explaining these warning signs could help customers and carriers terminate at least some of the cloned phone fraud at an earlier stage. Overcoming customer resistance to the use of precall-validation PIN numbers will definitely assist any anti-fraud program. Certainly, many legitimate customers may be willing to put up with the slight inconvenience of the PIN number system when they realize that because of that simple expedient, they will be keeping their phone from becoming a tool in the hands of the drug cartels. Again and again, drug investigations in my office have confronted the narcotics traffickers’ new ally: the cellular phone bandit. But with the continued efforts of the cellular industry, and a heightened awareness among legitimate cellular customers, we may be able to limit the use of this illegal tool and to punish this new form of crime as it deserves. Unquestionably, we must do our best in these efforts if we ever expect to meet this new challenge by the sophisticated criminal entrepreneurs of the ’90s.
DeMaria is chief of the Organized Narcotics Unit, where she supervises investigations into complex narcotics enterprises. The majority of these cases involve extensive electronic surveillance and multiple defendant conspiracies that include narcotics trafficking and money-laundering crimes. She has drafted proposed legislation in these areas and has lectured on electronic surveillance and cellular phone fraud.
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