This article outlines two different types of international phone fraud. The first can happen when you call an expensive country like Cuba:
My phone call never actually made it to Cuba. The fraudsters make money because the last carrier simply pretends that it connected to Cuba when it actually connected me to the audiobook recording. So it charges Cuban rates to the previous carrier, which charges the preceding carrier, which charges the preceding carrier, and the costs flow upstream to my telecom carrier. The fraudsters siphoning money from the telecommunications system could be anywhere in the world.
The second happens when phones are forced to dial international premium-rate numbers:
The crime ring wasn't interested in reselling the actual [stolen] phone hardware so much as exploiting the SIM cards. By using all the phones to call international premium numbers, similar to 900 numbers in the U.S. that charge extra, they were making hundreds of thousands of dollars. Elsewhere -- Pakistan and the Philippines being two common locations -- organized crime rings have hacked into phone systems to get those phones to constantly dial either international premium numbers or high-rate countries like Cuba, Latvia, or Somalia.
Why is this kind of thing so hard to stop?
Stamping out international revenue share fraud is a collective action problem. "The only way to prevent IRFS fraud is to stop the money. If everyone agrees, if no one pays for IRFS, that disrupts it," says Yates. That would mean, for example, the second-to-last carrier would refuse to pay the last carrier that routed my call to the audiobooks and the third-to-last would refuse to pay the second-to-last, and so on, all the way back up the chain to my phone company. But when has it been easy to get so many companies to do the same thing? It costs money to investigate fraud cases too, and some companies won't think it's worth the trade off. "Some operators take a very positive approach toward fraud management. Others see it as cost of business and don't put a lot of resources or systems in to manage it," says Yates.