In 2024, fraud and financial crimes are rising in global banking due to an evolving economic environment and expanding technological capabilities that create new opportunities for fraudsters.
In 2023, consumer-focused fraud increased, with attackers posing as energy firms, lottery companies and banks to extract sensitive information from unsuspecting victims. Inflationary pressure saw more consumers investing and exposed them to new types of fraud. Notably, investment and crypto scams cost consumers nearly $3.88 billion in 2022.
With fraud opportunities and impacts rapidly expanding, everyone has a role in fighting fraud. This is especially crucial for banks and financial institutions, which must be hyper-vigilant and have appropriate strategies, tools, and solutions to detect, prevent, and mitigate fraud. This approach ensures that they can maintain resiliency, protect consumers, and gain a competitive advantage.
AI is driving a new dark age of fraud and financial crimes
2023 delivered a tsunami of AI-driven technological change. The explosion and accessibility of AI have significantly increased fraud and financial crimes, and global banking will continue to be impacted by this growth throughout 2024 and beyond. Some fraud experts forecast a $2 billion annual increase in identity fraud due to generative AI.
Generative AI presents many opportunities for exploitation and, when applied, can help fraudsters circumvent security protocols. For example, deep fake technology can easily be used to evade face and voice recognition – traditionally used biometric security protocols banks use for identity verification. Addressing this challenge will require banks to enhance security measures and employ more robust identity verification processes.
Stu Bradley, Senior Vice President of Fraud, Risk, and Compliance at SAS, predicts, “Generative AI and deep fake technologies are helping fraudsters hone their multi-million-dollar craft. Banks and credit unions will scramble to make up for lost time in AI adoption – incentivized, no doubt, by regulatory shifts forcing financial firms to assume greater liability for soaring scams and frauds.”
What’s old is new again
Generative AI can be used to revive, renew, and enhance old forms of fraud and perpetrate new forms. Fraudsters are taking advantage of these opportunities, creating challenges for banks and consumers.
Thomas French, Senior Financial Fraud Consultant for banking at SAS, notes that “Fraudsters are reverting to old forms of fraud and enhancing them with recent technology like check and deposit fraud and even holding up mail carriers to break into boxes, steal credit cards and look for personally identifying information (PII). After raiding mailboxes for PII, crooks sell that data to another group of fraudsters on the dark web. The party that purchases this PII can then use it to rig account takeovers and engage in synthetic identity fraud. Generative AI can also be incorporated to accelerate criminal activity by creating automated routines to test and mount card-not-present attacks in a matter of moment, over and over, at breathtaking speed.”
Increased consumer vigilance requires swift action by banks
Generative AI usage to perpetrate fraud is not going unnoticed by consumers. According to a recent SAS Faces of Fraud Survey, 86% of consumers are more wary of fraud today, with 70% falling victim to fraud at least once. Moreover, nine out of 10 consumers expect businesses to do more to protect them from fraud, with two-thirds indicating that they would switch to another provider if better protections were offered.
In addition to increased consumer vigilance, 2024 will also deliver global regulatory change focused on consumer protections, underscoring the need for banks to address the challenge head-on and quickly.
In 2024 and beyond, banks will increase their fraud-fighting efforts by deepening their investment in advanced analytics and using AI's positive, innovative aspects to deliver increased efficiency and efficacy in fraud detection. A risk-based approach will help banks manage alerts, test scenarios and respond swiftly to evolving threats while ensuring compliance with banking regulations.
Fraud isn’t ending; it’s only getting more advanced. To maintain resiliency, safeguard customers, and gain a competitive edge, banks must use 2024 to advance and innovate with AI ahead of the fraudsters.