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Tidal wave of financial fraud gaining momentum from AI, deepfakes

Research from Mitek shows just a third of mature banks have robust ID verification
Tidal wave of financial fraud gaining momentum from AI, deepfakes

Mitek Systems Inc. has released the results of its Identity Intelligence Index 2024, shaking loose many of the familiar specters haunting the digital identity sector. A release on the findings says generative AI and sophisticated deepfake technology are driving a level of fraud that threatens to inundate the global financial services sector.

“Financial institutions are under attack,” says Chris Briggs, senior vice president of identity for Mitek Systems. “In today’s banking world, we know our customers are overwhelmed by an increasingly complex fraud landscape, ranging from AI-generated fraud and deepfakes globally, to record high increases in check fraud in the U.S. We need to unite government, businesses and technology to keep people safe online.”

Diverse fraud threats continue to multiply, and leaders face a constant challenge in keeping up with them as they evolve in real-time. For now, the biggest fraud threats are money laundering, account takeover and forgeries. But the rise of AI fraud and deepfakes is named as the biggest challenge ahead. New customers bring the most risk, since 42 percent of fraud takes place during customer onboarding or account setup. Regulations help, but don’t fix the problem, as 1 in 5 banks still find it hard to identify customers at any stage of the customer journey despite having global KYC protocols in place.

Banks want things to be simpler, both in terms of the technology they use and the ways in which regulations are communicated to them. Mitek’s findings show that financial institutions want to reduce their tech stack, and wish for a better understanding of the latest regulations. But statistics show they might also consider upgrading their security practices, and adding another layer or two to their security stack. Just 33 percent of mature banks have identity verification in place, compared to 41 percent of fintechs. Around a third of banking professionals cite using both liveness detection (36 percent) and biometrics (32 percent) to detect fraudulent attacks.

For the survey, Mitek and Censuswide polled 1,500 financial services risk and innovation professionals in the UK, U.S. and Spain.

SoFi learns that liveness detection matters

Beyond fraud, there is the risk of steep fines for companies that skirt compliance regulations. The Financial Industry Regulatory Authority (FINRA) is fining SoFi Securities US$1.1 million for weak fraud prevention mechanisms that led to the creation of fake accounts using stolen identities. An order from FINRA, cited in Compliance Weekly, says that SoFi “failed to establish and maintain reasonable customer identification and identity theft programs for SoFi Money, its cash management brokerage account that also contained features like a debit card and check writing capabilities.”

FINRA says the brokerage’s largely automated process for customer identity verification was vulnerable to fraud, as demonstrated by approximately 800 SoFi Money accounts created with fake or stolen identities, which were used for illegal, non-consensual transfers totaling $8.6 million, some $2.5 million of which fraudsters were able to withdraw from these accounts.

SoFi says it has resolved the security matter.

Account takeover attacks soar, according to Sift

A release says AI-powered anti-fraud platform Sift is adding account takeover attack rate and two-factor authentication rate trend data into its Fraud Industry Benchmarking Resource (FIBR), for easy comparison of how the two metrics connect across sectors and regions. The move comes in part as a response to the same prevalence of account takeover attacks noted in the Mitek report. Sift’s Q3 Digital Trust & Safety Index finds that account takeover attacks increased 354 percent year-over-year in Q2 2023 alone.

Incode joins Spain-based Global Fintech Alliance

San Francisco-based identity verification and authentication firm Incode has joined the Global FinTech Alliance, which aims to furnish global digital finance with a secure system for IDV. A release says Incode hopes to build partnerships around its AI-driven, liveness equipped identity verification tech across sectors such as banking, fintech, hospitality, airlines, and government.

“With our digital identity technology, we can offer security in transactions and prevent fraud in order to build trust, which is our mission at Incode,” says Ricardo Amper, the company’s CEO.

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