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Deepfakes Make Up 66% of AI Fraud While Crypto Scams Halved

Last Updated April 25, 2024 2:13 PM
Giuseppe Ciccomascolo
Last Updated April 25, 2024 2:13 PM

  Key Takeaways

  • Scammers are increasingly using voice and video deepfakes in financial fraud.
  • The use of AI-generated documents to bypass KYC checks is a growing concern in the cryptocurrency space.
  • However, AI-powered fraud detection systems are becoming increasingly effective in identifying and preventing scams.

Deepfakes, realistic AI-generated content, have become a weapon of choice for scammers. This has led to a surge in artificial intelligence (AI) assisted frauds, leaving businesses vulnerable to financial losses. Crypto users are among the victims of these illicit activities.

And while fraudsters have become more skilled at using AI to defraud their victims, AI-powered fraud detection systems are becoming increasingly sophisticated.

Deepfakes Lead in AI-Assisted Fraud

Artificial intelligence has significantly bolstered scammers, enabling their transition from mere cybercriminals to highly sophisticated attackers. Deepfakes, in particular, have emerged as a favored tool, offering scammers a potent means to perpetrate fraudulent activities with alarming ease and sophistication.

A recent incident  involving a finance professional who disbursed $25 million following a video call with a fraudulent ‘Chief Financial Officer’ is a stark reminder of the threat posed by deepfakes.

The proliferation of deepfake frauds has reached unprecedented levels, leaving businesses worldwide vulnerable to these malicious AI-generated content. A survey conducted by identity verification provider Regula , encompassing over 1,000 fraud detection experts from the United States, the United Kingdom, France, and Germany, underscores the prevalence of these scams.

Many respondent companies fell victim to one of three AI-facilitated advanced identity fraud techniques. Synthetic identity fraud, where scammers combine real and fake identity components, emerged as the most prevalent scam, accounting for 46% of reported cases.

Rise of AI-assisted identity frauds
Share of experts with experiences/views on advanced methods of identity fraud (in percentage). l Source: Statista

Voice deepfakes  followed closely, constituting 37% of reported incidents, while video deepfakes, though less common, still posed a notable threat, with 29% of respondents encountering such fraudulent attempts. The survey also revealed that over 80% of experts perceive these three methods as severe business threats.

As scammers increasingly leverage AI tools to orchestrate sophisticated attacks, the global cost of cybercrime is projected to reach unprecedented heights. Statista Market Insight  forecasts the global cybercrime cost to reach $9.2 trillion in 2024, marking a staggering $1 trillion increase from the previous year.

More alarmingly, despite concerted efforts to combat cybercrime, this figure is anticipated to surge by 70% in the coming years, reaching a staggering $13.8 trillion by 2028.

Crypto Scams Halve but Are More Sophisticated

Chainalysis  provided insights into the dynamics of illegal blockchain activity throughout 2023 and offered projections regarding future criminal strategies. Particularly noteworthy is the consideration of how emerging technologies, such as large language models (LLMs), may impact cryptocurrency-related crime.

The advent of artificial intelligence poses significant concerns for romance fraud, colloquially known as “pig butchering scams.” These scams often initiate innocuously but escalate into fabricated relationships used by fraudsters for financial exploitation.

While AI brings undeniable benefits to the crypto industry, it also presents considerable risks. Instances have already occurred where AI-generated documents circumvent Know Your Customer (KYC) checks, posing both security threats and creating new avenues for fraud.

In a promising trend, cybercriminal profits from crypto heists declined by over 50% in 2023 compared to the previous year. Hackers’ haul dwindled from a staggering $4 billion in 2022 to $1.7 billion in 2023, according to research  from blockchain intelligence firm TRM Labs. However, TRM Labs cautioned against complacency, highlighting the growing sophistication of phishing attacks. They underscored the potential for new, advanced threats to reverse the downward trend in hack volumes. Continued vigilance within the industry is imperative to forestall any resurgence of cybercrime in 2024.

AI May Be The Solution

While fraudsters have become more skilled at using AI to defraud their victims, AI-powered fraud detection systems are becoming increasingly sophisticated and widely adopted by cryptocurrency exchanges, wallet providers, and other crypto-related businesses.

These systems continuously monitor transactions, user behavior, and social media chatter to identify potential red flags. AI algorithms can analyze various factors to assess the risk of fraud. These include transaction size and frequency, user location and IP address, social media activity, and language analysis.

AI’s capabilities in detecting crypto scams and frauds are significant. AI algorithms can analyze vast amounts of data , identify patterns, and make predictions with remarkable accuracy. This makes them well-suited for detecting crypto scams and frauds, often exhibiting characteristic behaviors and red flags.

Specific applications of AI in this domain include analyzing transaction patterns, identifying malicious websites and social media accounts, flagging suspicious emails and messages, monitoring social media sentiment, and predicting scam likelihood.

The benefits of AI-powered crypto scam detection are compelling. AI offers real-time monitoring, scalability, continuous learning, reduced human error, and improved accuracy and efficiency compared to traditional methods. These advantages make AI-powered fraud detection systems invaluable tools in combating scams and frauds within the cryptocurrency ecosystem.

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