The Increase In AI Fraud And How To Mitigate It

Point of Discussion

AI technology could give insight to bad personnel in accessing sophisticated tools to commit fraud.
For organizations to fight against or reduce AI fraud, there is a need for them to revisit their fraud risk management frameworks.
Strategic tips such as those listed below, Risk Management, and Internal Audit, among other functions, can provide detailed and significant roles in reducing AI-enabled fraud risks.

In the past years, there has been a lot of news and published circumstances about the advantages that artificial intelligence (AI) has brought to the business world. Despite the advantages, we have overlooked some shortcomings of AI exuberance, leading us to question whether we are accommodating the potential for new scams enabled by AI fraud and criminal activity.

Kudos to the Generative AI (GenAI), bad personnel have taken this platform as a means of gaining access to sophisticated tools that can carry out more complex fraud activities from a large perspective which are cutting deep into the local fraud detective method. The report gathered shows a prediction that GenAI could drive a substantial increase in fraud losses in the United States ranging from $12 billion in the year 2023 to $40 billion by 2027.

Potential Fraud Attributed to GenAI

There has been an increase in the frauds attributed to GenAI which shows that 68% of consumers noticed an increase in the frequency of spam and scam mail received from November 2022 at the time GenAI tools began to be used at scale. To therefore give an insight, here are some of the frauds that have already surfaced

Synthetic identity and deep fake fraud: There have been some malicious videos, voice recordings, and deep fakes flying around the media lately. These videos tend to impersonate individuals and give an exact copy of their voice and speech pattern in a real format. An example of this kind of fraud refers to that of synthetic identity creation. With the use of this process, fraudsters could use AI and other tools to duplicate various identity documents such as driver’s licenses, and employee ID cards and they will look real and become a good fraudulent tool in impersonating personally identifiable information (PII). In these instances, fraudsters exploit free and low-cost AI tools to evade human detection and elude systems that are less advanced and authenticated.
Forging of financial documents and its Manipulation: Fraudsters can gain access to financial information such as this by creating a high convincing forged documents or reports such as invoices, pay slips, bank statements) or any other financial document that bears the exact letterheads, watermarks, or signatures. The growing complexity makes it harder for regular verification methods to spot fake documents. Furthermore, malicious individuals can utilize GenAI to generate artificial transactions. Harmless and legal in appearance, they can infiltrate functional systems like point-of-sale terminals, inventory management systems, or enterprise resource planning (ERP) platforms.

Looking at the huge damage that may emerge from such activity, there is a need to protect your organization from such risk.

Impacts and Steps needed by organizations to guide against GenAI fraud Risks

Although AI-powered fraud could cause a company monetary damage, it can also jeopardize an organization’s trust, reputation, and brand. Failure to safeguard stakeholders or the company itself can lead to a loss of trust from customers, investors, employees, and other stakeholders. How can companies ensure their protection? This site has pinpointed certain actions your organization can implement to strengthen your fraud risk management framework and guard against AI-facilitated fraud.

Risk assessment: There need for all organizations to endeavor to put their possible AI fraud paths into check as well as, gauge their chances and consequences, and examine the efficiency of current safeguards. Take into account GenAI’s developing abilities, like complex reasoning and identifying patterns, while creating and evaluating response strategies for different AI fraud situations.
Access and authorization procedures: Also, setting up various approval tiers and using multifactor authentication to verify the identities of authorized staff handling cash disbursements and other transactions needing approval to decrease the risk of AI-related fraud. Plans focused on cash withdrawals are frequently disguised with a feeling of pressing importance and a fake air of power. Having several approval stages can also delay the process and increase the chances of detecting potentially fraudulent characteristics or indicators in specific transactions. In total, multifactor authentication can prevent fraud by creating challenges for individuals using GenAI to pretend they are authorized employees approving transactions.
Document verification: Enforce strict verification procedures for documents coming from external sources to prevent the threat of fraudulent documentation created by AI. For instance, companies have the option to create direct lines of communication with creators of important documents instead of just accepting documents as they are given. Additionally, companies have the option to use external sources and databases to verify information for accuracy. Utilizing a variety of verification methods can lessen the likelihood of your company becoming a target of advanced, deceitful AI-created documentation.
Cooperation and sharing of information: Form a diverse team including internal audit, risk management, IT, cyber security, and employees from other departments to oversee AI technology developments and update risk assessments, security protocols, and fraud detection systems for upcoming AI features.
Employee training and communication are also needed in other to raise employee awareness of emerging fraud types and reinforce correct actions to address any breaches.

Conclusion

AI technology has undoubtedly brought numerous advantages to the business world, but it also presents new challenges in the form of AI-enabled fraud. By understanding the potential risks and implementing strategic measures such as robust risk management frameworks, multifactor authentication, and thorough document verification, organizations can protect themselves against these sophisticated threats.

Don’t wait to take action! Stay informed and proactive in safeguarding your business from AI-generated fraud. l’d love to hear your thoughts and experiences! Send me an email to share your insights or ask any questions.