The Impact of AI-Generated Synthetic Fraud on Finance


Fake people are having a major impact on our real world. AI technology has empowered even the most elementary of fraudsters with sophisticated tools that allow them to piecemeal real-looking identities, creating havoc for businesses across all verticals. The rise of AI-generated fake identities poses a serious threat to the integrity of financial systems, with consequences extending into the realms of politics and society. Synthetic fraud, the creation of fabricated identities using personal information from real individuals, is on the rise, with potential financial losses in the billions.

Despite substantial investments in fraud prevention, financial institutions are struggling to combat synthetic identity fraud, where AI is used to create fake identities, engaging in activities like opening lines of credit, checking bank account balances, or making small deposits. The ability to create images and convincing audio files complicates the issue, enabling the creation of deepfakes that deceive even the most discerning individuals.

A recent report from Wakefield Research highlights the ongoing struggles financial services organizations face in their battle against synthetic identity fraud. Despite having existing solutions, these organizations find themselves under constant assault from fraudsters armed with AI technology. The sophistication of these fraudsters is rising, making it challenging for institutions to keep pace.

The report reveals disturbing trends, with synthetic accounts seamlessly engaging in common financial activities to avoid detection. Shockingly, a significant percentage of surveyed companies have unwittingly extended credit to these fake personas, resulting in substantial financial losses.

The emergence of AI-generated Super Synthetic identities adds another layer of complexity to the ongoing battle against financial fraud. As synthetic identity fraud becomes more agile and sophisticated, the need for advanced detection methods becomes increasingly important. Professionals in the field are already expressing concern over the criminals’ increasing ability to evade detection, with over half believing that AI-generated fraud will worsen before effective preventive measures are implemented.

Leaders in the financial sector must stay vigilant and adopt innovative technologies swiftly to mitigate the risks posed by synthetic identity fraud. A proactive stance is essential to prevent irreversible damage to financial institutions and their customers.

The integration of multi-contextual, real-time data at a massive scale has proven useful in detecting signs of AI-generated identity fraud. This is because activities that make a synthetic account appear legitimate leave digital footprints that can give them away. A zoomed-out view of an account’s digital activity can expose the real person behind it—or reveal when there is no such person.

Given that synthetic identity fraud was already the most common form of identity fraud in the US, the prospect of fraudsters becoming more agile and effective is a sobering one. If the technology and methodology to detect and root out these synthetic identities before they can do damage isn’t agile or advanced enough to detect patterns of activity that are matched to another identity – financial institutions will keep paying the price.