06-05-2014, 04:29 PM
Cellular Telephone Cloning
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Executive Summary
The Economic Crimes Policy Team was chartered to advance the Commission’s work in
several areas, including the development of options for implementing the directives contained in
the Wireless Telephone Protection Act (Pub. L. No. 105-172; April 24, 1998). Specifically, this
act amended 18 U.S.C. § 1029 (Fraud and related activity in connection with access devices) with
regard to the cloning of cellular telephones. The report details the background, analysis, findings
and policy options identified by the team.
Wireless Telephone Protection Act
Because of increasing financial losses to the telecommunications industry and the growing
use of cloned phones in connection with other criminal activity, Congress passed the Wireless
Telephone Protection Act (WTPA) in April 1998. The legislative history indicates that, in
amending 18 U.S.C. § 1029, Congress was attempting to address two primary concerns presented
by law enforcement and the wireless telecommunications industry. 1
First, law enforcement officials testified at congressional hearings that they were having
difficulty proving the “intent to defraud” element of the pre-amendment provision regarding some
equipment used to clone phones.2 Although there is no legitimate reason to possess the equipment
unless an individual is employed in the telecommunications industry, the prosecution often could
not prove that the equipment was possessed with the intent to defraud.
Second, law enforcement officials often discovered cloning equipment and cloned cellular
telephones in the course of investigating other criminal activities, such as drug trafficking and other
fraud. The use of cloned phones to facilitate other crimes increases the ability of offenders to
escape detection because of the increased mobility and anonymity afforded by the phones. Gangs
and foreign terrorist groups are also known to sell or rent cloned phones to finance their illegal
activities.
How A Phone Is Cloned
The “cloning” of a cellular telephone occurs when the account number of a victim
telephone user is stolen and reprogrammed into another cellular telephone. Each cellular phone
has a unique pair of identifying numbers: the electronic serial number (“ESN”) and the mobile
identification number (“MIN”). The ESN/MIN pair can be cloned in a number of ways without the
knowledge of the carrier or subscriber through the use of electronic scanning devices. After the
ESN/MIN pair is captured, the cloner reprograms or alters the microchip of any wireless phone to
create a clone of the wireless phone from which the ESN/MIN pair was stolen. The entire
programming process takes ten-15 minutes per phone. After this process is completed, both
phones (the legitimate and the clone) are billed to the original, legitimate account.
The cellular telephone industry does not charge legitimate, victimized customers for
fraudulent calls; rather the companies absorb the losses themselves. In addition to losses due to
fraudulent billing, the cellular companies incur losses due to the fees paid for connections and
long-distance charges.
Work of the Economic Crimes Policy Team
The Team reviewed the Wireless Telephone Protection Act and its legislative history;
studied various literature and materials available on the cloning of cellular telephones; analyzed
cloning cases sentenced in fiscal year 1998; reviewed relevant case law; and, met with
representatives of the U.S. Department of Justice, U.S. Treasury Department, U.S. Secret Service,
and the Cellular Telecommunications Industry Association (CTIA). In addition to Commission
data, the Team also received and analyzed data from CTIA and the U.S. Secret Service.
Background
The U.S. Secret Service and the wireless telecommunications industry are increasingly
concerned about wireless fraud. First, the wireless telecommunication industry asserts that
wireless fraud has grown exponentially since its introduction into the market. They estimate that
wireless fraud costs the telecommunications industry over $650 million per year. Second,
according to the Secret Service cloned phones are the communications medium of choice for
criminals because it gives them mobile communications and anonymity. Cloned phones are
difficult to detect and trace, and phone numbers can be changed in an instant. Law enforcement
reports an increase in the number of cloned phones confiscated during investigations of other
offenses, such as drug distribution and credit card fraud.