Increase in AI Scams
The number of scams involving artificial intelligence doubled over the past year, resulting in financial losses exceeding $108 million for Americans.
High Success Rate
According to a report by Authority Hacker, nearly half of AI-based scams led to financial losses with an average loss of $14,600. This success rate is significantly higher than that of other types of fraud, which saw only 28% result in losses.
Analyst’s Insight
Fraudsters are leveraging the sophistication of AI to craft convincing communications aimed at unsuspecting consumers,” said Suzanne Sando, Senior Fraud and Security Analyst at Javelin Strategy & Research. Many bank imposter scams reported anecdotally cause headaches for both financial institutions and their customers.
Proper education by banks can help customers detect these scam communications themselves if they know how to recognize them. However, many of these scams can be thwarted before they proceed too far if consumers are informed about the dangers.
Costliest Scams
The most financially damaging AI scams involve investment fraud, where approximately three-quarters of victims lost money with an average loss of nearly $55,000. Imposter scams, which include business impersonation and romance scams, are the second most costly.
Prevalent Scams
Online shopping and negative review scams remain the most frequent AI-related scams because cybercriminals can easily create convincing images of fake products with AI technology to sell them.
AI Makes Messaging Effective
Criminals utilize deepfakes and voice cloning through AI to forge aspects of an individual’s personality. They often pair this technology with manipulation tactics, especially by using urgent language to prompt immediate responses.
Urgent Language
Criminals frequently use text indicating fraud detection on a customer’s account and asking them to verify transactions via a link. Clicking such links might install malware, which can be used by criminals for further fraudulent activities.
Customer Education
Financial institutions must educate customers about recognizing AI scams. Instead of responding to direct messages or emails, they should contact the relevant business and seek confirmation from there. Banks can also leverage their own AI to detect potential scams before significant transactions occur.
Pattern Recognition
Consumers between 30 and 39 are most likely to fall victim to these AI scams, possibly due to lower social media engagement compared to older adults. However, older adults typically report fewer instances of fraud.
Financial Institution Action
Employing AI can help financial institutions detect potential scams before they become serious,” said Sando. Using consumer data to recognize unusual behaviors, this technology allows for early intervention and prevents funds from going to criminals.”
