A salesman at a Bangor, Maine auto parts store arrived at the office on the morning of February 22 and noticed that all 11 of the company’s phone lines were lit up. As he was the first to arrive, and the only person in the building, he knew that something was amiss. As it turned out, the company’s private branch exchange (PBX) had been hacked. In a single night, the hackers had racked up a long distance bill that was roughly double the company’s average monthly phone bill. A similar incident was recently reported by a Los Angeles software company, who found that scammers hacked into their PBX and placed 4,390 long distance calls in under an hour (that’s over 150 calls per minute).
Fraud in the VoIP industry is on the rise in 2012. A recent report from watchdog group, the Australian Competition and Consumer Commission (ACCC) detailed over 83,000 fraud complaints in 2011. That is nearly double the number of complaints from 2010, and quadruple the number from 2009. Fraud is common in industries across the board, but has become a startling issue for VoIP carriers and providers. In fact, the ACCC estimates nearly 20% of the fraud complaints they received in 2011 involved hacking in the telecommunications industry.

Unfortunately, these incidents are not uncommon. In fact, these companies were lucky to have someone catch the fraud in a matter of hours. Most enterprises who are victims of VoIP fraud don’t ever realize that they have been hacked, and the problem isn’t caught by VoIP providers sometimes for days. According to Jim Dalton, CEO of leading VoIP management software provider TransNexus, a single fraud event can cost a VoIP provider anywhere from $5,000 to upwards of $50,000. Revector, a U.K.-based fraud management company, recently reported that some telcos are losing up to $150 million per year in fraudulent calls. The ACCC reports that just in Australia, fraud losses have increased a stunning 35% from 2010.

Why are VoIP providers suddenly being targeted for fraud? There are several contributing factors. First, hackers have become more sophisticated as the VoIP industry has grown into a major player in the telecommunications field. Rather than breaking into trunk lines, hackers are targeting individual customers’ PBXs. Once they gain access to a PBX, they begin calling international premium-rate services to generate revenue.