With so much money swimming around, crypto and digital assets have long been targets for scammers looking to separate investors from their cash. A new report gives yet another reason for holders to be concerned.
According to Sumsub and Crypto UK, there has been an alarming rise in the use of deepfake technology for fraud in the cryptocurrency industry. According to the report’s findings , deepfakes used for fraudulent verification attempts more than doubled in 2023 compared to 2022.
The report surveyed over 100 cryptocurrency companies and analyzed 900,000 verification checks and thousands of fraud cases to assess the state of identity verification practices and trends.
One of the most striking statistics uncovered was the 128% year-over-year increase in deepfakes used to impersonate individuals during know-your-customer (KYC) identity verification processes.
Deepfakes use artificial intelligence to digitally swap a person’s face onto an existing photo or video. The resulting media can appear uncannily realistic . Fraudsters are now leveraging deepfake technology to impersonate legitimate users and open fraudulent accounts at cryptocurrency exchanges and platforms.
“All businesses operating digitally and performing remote verification are vulnerable to deepfake fraud. However, fintech, cryptocurrency, and gambling platforms are especially at risk,” the report explains.
According to the report, Spain, the UK, Japan, and the US are the top sources of deepfake fraud attempts.
The rise in deepfakes poses significant risks to investors in the cryptocurrency space. Exchanges that fail to detect deepfake fraud may unknowingly approve fraudulent accounts, putting user funds at risk and exposing platforms to financial losses and compliance violations. As deepfakes become more sophisticated, manual fraud detection techniques will likely prove inadequate.
To combat deepfakes, the report recommends that cryptocurrency businesses implement automated verification systems that leverage AI and machine learning. Advanced technologies can help detect subtle imperfections in synthetic media that are invisible to the human eye.
In addition to the rise in deepfakes, the report found that fraudsters are moving away from using stolen documents to completely forged identification. In 2022, 53% of fraud cases involved stolen docs compared to just 36% in 2023.
The number of cases involving entirely fabricated IDs jumped from 20% to 30% over the same period. This indicates fraudsters are becoming more adept at producing high-quality fake credentials from scratch.
The report emphasizes the importance of continuous monitoring beyond initial verification. Its statistics show that 70% of fraud occurs during the account usage phase, underscoring the need for ongoing vigilance to detect suspicious transactions and activities throughout an account’s life cycle.