Financial institutions across North America are facing an unprecedented surge in fraud schemes, with social engineering scams skyrocketing tenfold over the past year. BioCatch data highlights how digital banking fraud has transformed, now incorporating advanced methods like deepfake media to deceive both customers and banks.
BioCatch’s latest findings show a significant shift in fraud strategies. Social engineering scams, which trick victims into revealing sensitive information, now make up a substantial portion of digital banking fraud. These tactics often play on trust through impersonation and emotional manipulation. For example, fraudsters might make fake customer service calls or send deceptive text messages. The rise of generative AI tools has further enabled the use of deepfake technologies, allowing scammers to mimic voices or create lifelike visuals to trick their targets.
“As we outlined in our 2024 AI, Fraud, and Financial Crime Survey and ScamGPT white paper, artificial intelligence is super-charging fraud, compounding its impact, and allowing bad actors to scale and sophisticate their scams with deepfakes and other devices,” says BioCatch global advisory director Seth Ruden.
He adds, “As the industry deploys the newest authentication methods in both account opening and account takeover processes, fraudsters will undoubtedly attack these as well.”
The Financial Crimes Enforcement Network (FinCEN) has issued a warning about fraud schemes that exploit deepfake media to infiltrate financial systems. These attacks are often part of larger, coordinated efforts aimed at high-value transactions or account takeovers.
FinCEN, similar to BioCatch, has observed a rise in suspicious activity reports from financial institutions. These reports frequently indicate the use of deepfake media, such as the creation of fraudulent identity documents designed to bypass identity verification and authentication processes.
Financial Impact and Industry Response
The extent of these attacks is evident in Sift’s Fraud Industry Benchmarking Resource (FIBR), which provides metrics on transaction fraud rates and the costs associated with account takeovers.
| Payment Method | Percentage of Fraudulent Transactions |
|---|---|
| Credit and Debit Cards | 85% |
| Electronic Fund Transfers | 20.5% |
| Digital Wallet Payments | 15.5% |
Within the Sift Global Data Network, credit and debit cards are implicated in a whopping 85 percent of fraudulent transactions. However, the trend shifts in certain industries, especially those with high transaction volumes. In the iGaming and online gambling sector, for instance, credit and debit card fraud accounts for only 64 percent. Instead, electronic fund transfers make up 20.5 percent of fraudulent activity, while digital wallet payments contribute 15.5 percent.
The report warns that businesses failing to adapt to these evolving fraud tactics risk significant losses and damage to their reputations.
Technological Advancements in Fraud Detection
To counter this rise in fraud, technology providers are enhancing their fraud detection systems. Socure, for example, has introduced its graph intelligence module following the acquisition of fraud detection firm Effectiv. This technology leverages machine learning to analyze connections between user behaviors, devices, and transaction histories, aiming to identify fraud patterns more accurately and swiftly than traditional methods.
Organizations that adopt graph intelligence can see notable improvements in their fraud prevention efforts. The module provides fraud and data science teams with comprehensive data and a view of identity relationships, which helps in reducing false positives.
Basically, these advancements mean that banks can detect suspicious activities earlier, making it harder for fraudsters to succeed. It’s a step in the right direction, but the battle isn’t over yet.
Regulatory and Compliance Challenges
Regulators are also stepping up their efforts to combat these sophisticated fraud schemes. FinCEN’s alert on deepfake-exploiting fraud schemes underscores the need for stricter compliance measures and better coordination among financial institutions. But, how effective can these measures be when fraudsters are continuously evolving their tactics?
Moreover, compliance departments within banks are under immense pressure to keep up with the latest threats. They must ensure that their security protocols are robust enough to handle the new wave of deepfake and social engineering attacks. This involves not just implementing advanced technologies but also training staff to recognize and respond to these threats effectively.
Customer Awareness and Education
Another crucial aspect in the fight against fraud is customer awareness. Financial institutions are increasingly investing in educating their customers about the latest fraud schemes. Simple measures, like warning customers about the dangers of sharing personal information over the phone or through unsolicited messages, can go a long way in preventing fraud.
- Regular updates on new scam tactics
- Easy-to-understand guides on protecting personal information
- Prompt alerts about suspicious activities on accounts
Educated customers are less likely to fall victim to these scams, making it harder for fraudsters to succeed. It’s all about staying one step ahead and making sure that everyone is informed and vigilant.
The Road Ahead
Looking forward, the financial sector must continue to innovate and adapt to the ever-changing landscape of digital fraud. Collaboration between banks, technology providers, and regulators will be essential in developing effective countermeasures. Additionally, ongoing investment in research and development will help in staying ahead of fraudsters who are quick to exploit new technologies.
Financial institutions need to embrace a proactive approach, continually updating their security measures and fostering a culture of awareness and vigilance. Only then can they hope to mitigate the risks posed by deepfakes and social engineering scams.
