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The growing threat of AI-enabled fraud

AI Fraud
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Generative Artificial Intelligence (GenAI) is revolutionising many industries, but with this innovation comes significant risks. GenAI refers to a type of artificial intelligence that can generate new content—such as images, text, music, and videos—by leveraging vast amounts of data from sources like the web and social media. Using advanced generative models, it creates content that is increasingly realistic and sophisticated. According to a recent report by the National Crime Agency (NCA), GenAI represents one of the most substantial threats to the fraud landscape today. Fraudsters are exploiting GenAI tools such as large language models (LLMs), voice cloning, and deepfakes to carry out increasingly sophisticated scams that are harder to detect and prevent.

How GenAI is changing the fraud landscape

AI-driven fraud is not a new concept, but the accessibility and capabilities of GenAI have dramatically expanded fraudsters’ arsenals. Fraud types that are highly likely to be enhanced by GenAI include:

  • Investment fraud: AI-generated bank statements and fake reviews make it easier to fabricate the legitimacy of investment opportunities.
  • Romance fraud: Deepfake images and videos help fraudsters create convincing personas to manipulate victims emotionally and financially.
  • Impersonation fraud: Voice cloning technology allows scammers to convincingly impersonate family members, colleagues, or business executives.
  • Phishing attacks: AI-generated content enables fraudsters to create highly personalised and convincing phishing emails that bypass traditional detection methods.

The escalating threat to financial services

As cybercriminals increasingly turn to AI to execute complex fraud schemes, the financial sector faces a high-stakes battle to protect its customers and assets. Recent research by Signicat reveals that AI-driven fraud now constitutes 42.5% of all detected fraud attempts in the financial and payments sector, marking a critical turning point for cybersecurity. Alarmingly, an estimated 29% of these attempts are considered successful.

The financial sector has experienced an 80% increase in fraud attempts over the past three years, driven in part by fraudsters adopting AI tools such as deepfakes, synthetic identities, and sophisticated phishing campaigns. Despite the rising risk, less than a quarter (22%) of financial institutions have implemented AI-driven fraud prevention measures, highlighting a significant vulnerability.

A 2024 report by Kasada found that 87% of executives in financial institutions are concerned about bot attacks and AI-driven fraud, yet three-quarters of organisations lack the expertise, resources, and budget to effectively tackle these threats. This suggests that many companies are unprepared to face the evolving AI-enabled fraud landscape.

Why GenAI fraud is so effective

One of the most alarming aspects of GenAI fraud is its ability to seamlessly mimic human behavior. AI-generated content can be nearly indistinguishable from authentic communications, leading to increased underreporting by victims who may not realise they have been defrauded. Fraudsters can use GenAI to:

  • Quickly learn about specific targets and create personalised scams.
  • Generate realistic fake documentation to bypass due diligence processes.
  • Automate scam operations at scale with minimal effort and cost.

Combatting AI-enabled fraud

Despite these challenges, AI technology also offers opportunities to detect and combat fraud. Businesses can take several proactive steps to protect themselves, including:

  • Enhanced training programs: Ensuring employees are educated on the latest AI-driven fraud tactics and how to recognise them.
  • Advanced detection tools: Leveraging AI-driven fraud detection systems that can identify suspicious patterns and anomalies.
  • Multi-layered authentication: Combining voice recognition with other authentication methods to make it more difficult for fraudsters to gain access.
  • Regular audits: Conducting comprehensive compliance audits to identify vulnerabilities and strengthen internal controls.

Preparing for the future

As fraud tactics continue to evolve, staying ahead of the curve is crucial for businesses. By investing in training, implementing robust security measures, and leveraging AI for defence, organisations can mitigate the risks posed by GenAI fraud.

At Neopay, we help businesses stay compliant and secure in an increasingly complex digital landscape. Our tailored solutions provide expert guidance on compliance frameworks, audits, and training programs to ensure businesses are equipped to tackle emerging fraud threats.

If you’d like to learn more about how Neopay can support your compliance efforts in the face of AI-driven fraud, get in touch with our team today.

 

Key AI definitions

  • Artificial Intelligence (AI): Machine-driven capability to achieve a goal by performing cognitive tasks.
  • Generative Artificial Intelligence (GenAI): AI systems that can create new content, such as text, images, audio, and video, based on input prompts.
  • Large Language Model (LLM): Models trained on vast volumes of text data, typically from the internet, that can generate human-like text responses.
  • Voice Cloning: AI technology that creates a simulation of a person’s voice based on audio samples.
  • Deepfake: AI-generated videos or images that manipulate content to replace faces or voices, creating realistic but fraudulent material.
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