FinCEN Highlights Fraud Risks Related to AI

Legitimate business isn’t the only thing AI is “disrupting” as fraudsters use AI to streamline and innovate illegal activities. The financial services sector is a frequent target of fraudsters using AI and the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently warned about the dangers of AI-generated deep fakes targeting financial institutions. Criminals utilize AI to bypass identity verification by creating fake credentials and identification documents, even generating realistic faces for webcam identification. This allows them to illegally open new accounts and lines of credit or access existing customers’ funds. FinCEN offers some best practices for preventing fraud as Davis Wright Tremaine writes in a recent memo:

“To reduce the risk of deepfake fraud, FinCEN suggests financial institutions re-review a customer’s account opening documents, conduct a reverse image search and other open-source research, or subject identity documents to deepfake detection software. Financial institutions should also consider the use of advanced identity verification techniques recommended by the Department of Homeland Security, such as liveness checks and biometric authentication. Beyond account opening, institutions should closely monitor accounts for suspicious activity patterns, like rapid transactions, high payment volumes to high-risk payees, and frequent chargebacks, and subject those accounts to enhanced due diligence.”

As businesses explore new AI opportunities it is important to remember that this technology is a double-edged sword. Our focus shouldn’t solely be on capitalizing on the good, but also mitigating the bad. The financial services sector offers us a good example of how AI and fraud can be intertwined. However, the use of AI for fraudulent purposes isn’t exclusive to financial services. The proliferation of AI demands that we examine emerging vulnerabilities and employ best practices to combat fraud to protect ourselves and our customers from falling victim to tech-savvy fraudsters.