Experts: Rise in AI-fueled fraud warrants preventative measures

NASHVILLE — Bankers have multiple tools at their disposal to combat the significant rise in fraud originating from artificial intelligence and social media, according to Minneapolis-based professional services firm CLA. .Principals Joshua Juergensen and Nick Meyer presented an overview of the cybersecurity landscape and how banks can respond March 13 during the fourth and final day of ICBA LIVE.According to the Federal Trade Commission, consumers lost more than $12.5 billion in fraud last year, a 25 percent rise from the previous year. Community banks are a prime target for scammers in the holiday season, Juergensen said. Such scams are perpetrated through social media, emails and text messages and typically feature fraudulent shopping discounts, vacation deals and gift card purchases. According to CLA, fraud losses are expected to surge to nearly $40 billion just from generative AI. The emerging technology can now make grammatically correct emails targeted toward potential victims. Human error is often behind successful fraud, according to CLA. Meyer suggested banks require additional training for employees who fail such tests a certain number of times. Juergensen called for banks to enforce multi-factor authentication and use phishing-resistant passkeys. True multi-factor authentication cannot be completely through email, he added, and should instead be verified through at least two of three considerations: Something your customer knows; something your customer is; and something your customer has. Biometric authentication is the hardest technology to manipulate, according to CLA. Juergensen recommended undertaking regular internal tests around phishing — fraudulent emails, messages and texts — and vishing — fraudulent phone calls or voicemail messages. Check washing includes altering stolen checks to change payee names and amounts; and alterations, which consists of unauthorized changes to checks and forged signatures. Check kiting exploits the time lag in check payments to prematurely withdraw funds. Third-party vendors can analyze transactions to identify trends, verify the check stock and review checks for authentic signatures, according to CLA. Vendors analyze images to determine whether checks are on a different paper than bank stock. Positive Pay allows banks to match account numbers, check numbers and check amounts with the list of checks previously submitted by customers. Juergensen encouraged bankers to question customers about the legitimacy of a transaction when they suspect fraud. Another option CLA presented was requiring faster customer notice of invalid checks — potentially 15-30 days instead of the one-year standard under the Uniform Commercial Code. The firm also suggested banks add language to their agreements to protect them if a customer alleges bad faith.AI has both positive and negative implications for banking, Meyer said. Faster payment methods have made banking more convenient while also increasing the risk of fraud. The potential for AI-fueled losses makes customer education crucial, he added. Criminals can create deep fake videos on their phones using only a few seconds of audio, Juergensen said. Deepfakes are used to impersonate legitimate customers, challenging the use of voice recognition technology as an authentication method. Postal theft surged during the pandemic and has continued to rise, according to CLA. CLA listed several other common fraud cases:Social media, especially with the rise of person-to-person payments. According to CLA, half of recent fraud claims originated on social media. To combat the rise in such fraud, J.P. Morgan has banned Zelle payments linked to social media. Family emergency scams, in which victims are tricked into believing that their loved ones are in danger.Romance scams targeting the lonely and elder scams intended to steal their savings. Investment scams and fake supplemental income claims intended to steal personally identifiable information.Elder scams intended to steal their savings.