While people are very aware of the threat of scams, these unique threats continue to succeed and impact consumers and their financial institutions.
Unlike other types of fraud, scams are about exploiting trust through social engineering, manipulation or misrepresentation. As a result, the victim is often placed in a false sense of security and can even willingly hand over their financial details to the scammer, not realising their ulterior motives until it is too late.
The amount of money scammers steal shows why it continues to be a popular method of fraud. A total of $1.03trn globally is estimated to be stolen each year, according to the Global State of Scams Report 2024.
Unit21, which offers a customisable compliance platform, has launched a new whitepaper exploring the evolution of scams, why they are a unique threat, regulatory gaps and how financial institutions and FinTechs can combat them.
The whitepaper, ‘The Scam-demic: How Fis & FinTechs can fight back against the latest scam threats’, highlights how technology has transformed the landscape of scams.
Technological innovation is a double-edged sword. While it has helped financial institutions transform their efforts in combatting illicit activity, it is also helping scammers evolve their operations. One clear example is through phishing emails, which were once laden with poor grammar and typos, making them easy to spot. However, widely available generative AI models have allowed anyone to craft emails with near-perfect English and even phrase them in a believable tone.
This isn’t the only way AI has upped the scammers’ game. Unit21 highlighted that deep-fake technology can be used to imitate someone’s voice, their likeness via video and alter photos. These can have a tremendous impact on the ability of a victim to assess the validity of a scam. For instance, a grandparent could be fooled into thinking they are speaking to their grandchild via a new phone, and they need some quick cash for a late rent payment or something else urgent. Similarly, a criminal could create fake intimate photos of a victim and leverage them for blackmail.
The report notes that AI has also made it far easier for scammers to target multiple people. Rather than needing to focus effort on one person at a time, AI can automatically run scams. This means a single criminal could have thousands of victims at once, increasing their chances of a successful payout.
In its whitepaper, Unit21 also outlines how the current regulatory environment is changing to ensure consumers are more protected. While these are important policies, it fails to address the root cause of the problem and shifts financial burdens to the financial institutions. As the threat of scams continue to rise, firms will need to find ways to ensure they have a better way of tackling scams. This has become tougher in a time when consumers demand instant service, removing the time a firm has to investigate a suspicious transaction.
In its report, Unit21 outlines how its platform is helping companies to assess scams from different angles so they can be better positioned to spot suspicious or possible fraudulent technology. This is achieved through counterparty risk, IP data enrichment, scams out-of-the-box rules and an AI agent for scams.
For more insights into how AI and Unit21 can help firms combat the rising threat of scams, read the whitepaper here.
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