By Masha Borak
The risks of generative artificial intelligence are looming over the financial services industry.
As access to more advanced AI tools becomes available, some financial institutions are worried that their risk management frameworks may not be enough to defend against the wave of deepfakes, the U.S. Department of Treasury says in a new report.
The report, published on Wednesday, surveys the state of AI use or cybersecurity in the financial sector based on 42 interviews with industry stakeholders. The report highlights government figures on identity-related exploitations, showing that there were 1.6 million reports of suspicious activity related to identity in 2021, indicating $212 billion in suspicious activity.
Despite alarmist numbers, the report found that many industry experts believe most cyber risks related to AI can be managed like other IT systems. One takeaway, however, is that smaller financial players could be more vulnerable to AI threats.
Unlike large institutions that have been working on in-house AI systems, smaller organizations may lack the data resources required to train large AI models used in fraud detection and cybersecurity. Sharing information on fraud collaboration in fraud protection is limited among financial firms.
“A clearinghouse for fraud data that allows rapid sharing of data and can support financial institutions of all sizes is currently not available. The absence of fraud-related data sharing likely affects smaller institutions more significantly than larger institutions.” the report notes.
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The Department of Treasury also outlines other recommendations for beating AI fraud, including defining regulations and best practices, expanding the NIST AI Risk Management Framework and coming up with explainability solutions for black-box systems like generative AI.
BioCatch releases banking fraud report
European financial institutions are also struggling with fraud, including fraud powered by generative AI.
The 2024 Digital Banking Fraud Trends in EMEA report, compiled by behavioral biometrics company Biocatch shows that social engineering scams, especially voice scams, are the main focus across Europe. The trend is fueled by changes in regulations and the tightening of digital security among banks.
In the UK, banks have hit back against voice scams with the company’s data showing a 25 percent drop in this type of fraud in 2023. Criminals, however, are moving over to new versions of Account Takeover (ATO) fraud which grew by 13 percent last year.
Three-fourths of reported fraud cases among BioCatch’s European customers took place on mobile devices. The company recorded a 43 percent rise in cases involving stolen devices in the region, with Spain and the UK among the countries recording increases.
BioCatch also identified more than 10,000 suspicious accounts among the company’s European customers thanks to its mule account detection software. The company presented a new product and new numbers related to mule account attacks in September last year.
HID, Plaid form partnerships with financial institutions
In the meantime, financial institutions are forming partnerships that will help protect customers from fraud.
Identity solutions company HID will provide customer authentication for UK bank Santander. The deal will be completed in partnership with banking SaaS company Temenos. Santander will be using HID’s mobile client SDK HID Approved for its digital banking platform.
Fintech company and biometric verification provider Plaid sealed a deal with banking automation company Sandbox Banking to provide its automated identity verification products.
Sandbox Banking’s customer experience product, Customer360, will be using Plaid Identity Verification to strengthen onboarding processes, prevent identity theft and ensure secure account creation, the companies said in a release.
Source: Biometric Update
Masha Borak is a technology journalist. Her work has appeared in Wired, Business Insider, Rest of World, and other media outlets. Previously she reported for the South China Morning Post in Hong Kong. Reach out to her at masha@biometricupdate.com.
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