The Rise of AI-Powered Fraud: Can Technology Stop It?

US Banks Processed Over $448 Billion in P2P Transactions in 2022, and AI is Helping Scammers

As the digital transformation continues to impact our society and economy, online fraud has become a significant concern for individuals and businesses. Peer-to-peer (P2P) transactions have grown increasingly popular, with US banks processing more than $448 billion in P2P transactions in 2022. Unfortunately, these platforms have also become a prime target for scammers.

The Role of AI in Online Fraud

Cybercriminals are leveraging the power of artificial intelligence (AI) to outwit fraud-detection systems. They are using cloud infrastructure to build machine learning (ML) models capable of circumventing the defenses built by companies to spot obvious fraud. This has resulted in modern fraud prevention becoming a “battle of the machines.”

Fraudsters are using cloud services to make the first move in these battles, building ML models capable of avoiding detection. For example, if a company sets a rule to flag transactions over $900 for secondary verification, an ML tool could be programmed to calculate the point at which high-value transactions are inspected, allowing fraudulent transactions under $900 to avoid detection.

Even sophisticated ML models can be probed and attacked for weaknesses by malicious AI. The more opaque AI systems become, the riskier they are to deploy in production settings. Humans will only have a limited understanding of their behavior and the outputs they might generate. To remain effective, they need to be trained on data from previous attacks, making them vulnerable to exploitation when presented with a slightly different scenario.

AI could also generate fake image data of a user’s face, audio data for authentication checks, mimic human behavior such as mouse movements, and generate different combinations of stolen data to bypass validation checks.

Defending Against Malicious AI

Cybercriminals often have an advantage over defenders but by tweaking their own approaches, fraud and risk teams can counter malicious AI. For example, defenders can use new and improved ML algorithms and shift fraud detection to the network edge, making it easier to spot unusual or high-risk behavior with a higher degree of accuracy.

Flexible signal generation is also a powerful tool in a security engineer’s arsenal. It could be used to trigger image analysis, compare mouse movements, and capture intelligence across the user’s entire session, providing a richer and nuanced baseline and making it easier to spot machine-generated anomalies.

Furthermore, from a strategic standpoint, greater visibility into the customer experience is invaluable, supporting other business functions. Moving fraud detection to the edge is a preemptive move that makes it harder for fraudsters to succeed, increasing the likelihood that they’ll move on to more vulnerable targets. AI is becoming very sophisticated very quickly, and the battle of the machines has only just begun. It’s time for businesses and individuals to buckle up and take action to protect themselves from online fraud.

Advice for Readers

As AI-powered fraud becomes more sophisticated, businesses and individuals must take steps to remain vigilant and protect their financial information. This includes using two-factor authentication, keeping software up to date, avoiding suspicious emails and links, and not sharing sensitive information online.

Furthermore, businesses can strengthen their defenses by using new and improved ML algorithms, shifting fraud detection to the network edge, and using flexible signal generation to detect machine-generated anomalies. By taking these steps, businesses and individuals can stay one step ahead of online fraudsters and protect their financial well-being.

Editorial

The use of AI in online fraud should serve as a wake-up call for businesses and individuals alike. While AI-powered fraud may seem like a challenging problem to solve, it’s essential that we take it seriously and take appropriate action. Businesses must invest in technologies that can detect and prevent fraudulent activity, while individuals must remain vigilant and take steps to protect themselves from online scams.

Online fraud is not just a financial issue; it can also have a significant emotional impact on individuals who fall victim to it. By taking action now, we can ensure that we protect our financial and emotional well-being in the years to come.