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Q&A: AI and sophisticated scams targeting businesses and consumers in 2024

Consumers, tired of contending with these online threats, are going back to physical bank branches.

Photo: © AFP
Photo: © AFP

The rise of generative AI-aided DIY fraud, deceptive donation and investment opportunities, along with a resurgence of synthetic identities, are among the top ways Experian predicts fraudsters will take advantage of consumers and business in 2024.

Experian has launched its annual Future of Fraud Forecast, revealing the top five anticipated fraud threats for the new year.

To learn more, Digital Journal caught up with Kathleen Peters, chief innovation officer at Experian Decision Analytics in North America, to explore the biggest anticipated fraud threats for 2024. This is to help businesses and consumers protect against fraud.

Digital Journal: Experian recently launched its 2024 future of fraud forecast. Tell us about this year’s fraud predictions.

Kathleen Peters: This year’s predictions reflect the emergence of AI as a tool for fraudsters.  We’re seeing deep fake content and social engineering on the horizon as fraudsters become more sophisticated in their use of AI and other technologies. On the other hand, we’re also seeing some old favourites gaining traction. For instance, consumers could fall victim to fraudulent requests for funding social causes or investment schemes.

Consumers, tired of contending with these online threats, are going back to physical bank branches, prompting the need for more on-site identity authentication through methods such as biometric verification. Retail scams, in which people ask for credit for goods they never returned, will increase. The year looks to be one in which businesses and consumers will face varied, clever threats, a pattern that has become the norm in fighting fraud.

DJ: Tell us more about how AI will contribute to fraud?

Peters:   The recent growth and accessibility of generative artificial intelligence has made it possible for anyone to use the technology for worthwhile endeavours like research and analysis. It has also given fraudsters a new toolbox from which to develop a variety of scams. Easily available and manipulated, there really is no limit to the AI-powered schemes a fraudster can create. As a result, Experian predicts AI will be a popular tool in “do-it-yourself” fraud. We will see deepfake emails, voice, and video as well as fake websites – all designed to execute attacks online. Bad actors will be able to launch fraud attacks more quickly, easily and accurately, making it challenging to know what is real.

Social engineering, which has been in practice for a while as a means of creating fake identities, will also become more prevalent with AI. Fraudsters will use generative AI to create fake identities on social media. Once these profiles are online, they can interact with people and companies, appearing as if they are real and making it more difficult to identify and investigate. Given the endless number of profiles generative AI can produce, we expect to see a spike in these types of fraud attacks.

To combat fraud and protect consumers, we believe businesses will need to “fight AI with AI,” to stay ahead of these criminals.

DJ: Do you anticipate new developments in synthetic identity fraud?

Peters: During the pandemic, fraudsters established synthetic identities to commit fraud but abandoned them as they realized there were easier methods of stealing funds through the various aid programs that existed to help companies and consumers. Those dormant identities have since developed several years of history, making it easier to elude detection. We anticipate fraudsters will use those accounts to “bust out” and steal funds over the next year.

Businesses need to incorporate the right fraud prevention tools to detect and distinguish between different fraud types. By recognizing the type of fraud, they can then work with a partner to determine the best steps to treat it. Leveraging data, advanced analytics and technology provides companies with a more in-depth view of fraudulent behavior and helps with the detection of patterns and abnormalities that can flag potential fraud while still providing a frictionless experience for legitimate customers. 

DJ: You mentioned retail scams.  What is the latest trend?

Peters: Fraudsters continue to view retail as a lucrative opportunity due to the sheer volume of online purchases and returns. The practice of empty returns is a trend to watch this year.

Empty return fraud occurs when a retailer opens a return package and it’s empty. The customer claims they returned the item, and it must have gotten lost or stolen during the shipping process. Fraudsters will use this method to keep merchandise and cost companies lost goods and revenue.

DJ: It’s interesting that people are returning to physical bank locations. What’s driving this?

Peters: Consumers are seeking a refuge from online identity concerns and turning to brick-and-mortar bank branches to feel safer when opening new accounts or asking for financial advice.  However, it’s important to keep in mind that human error or oversight can still happen in-person, so lenders will need to leverage more digital identity verification methods to keep legitimate customers safe.

An Experian survey found that 85 percent of people report that physical biometrics is the most trusted and secure authentication method they’ve recently encountered, yet only 32% of businesses are using this method to combat fraud. We anticipate that lenders will see the benefits and begin using more digital identity tools like physical biometrics to protect their customers’ identities and prevent losses.

DJ: What can consumers do to prevent identity fraud?

Peters: The number of ways fraudsters can perpetrate scams continues to grow, so consumers need to be vigilant and on high alert when it comes to the communications they receive. Whether it is via text message, email, phone call or even social media messages, people will need to do their due diligence when it comes to ensuring they know who they are interacting with.

We encourage people to practice security measures at the individual level that can help prevent identity theft. This includes avoiding using public Wi-Fi networks, using strong and varied passwords for important accounts, shopping on secure websites and avoiding giving out any personal information to those they don’t know.

Consumers should also check their credit reports regularly. Doing so can help them spot fraudulent activity and address it before it becomes a larger problem. They should also consider signing up for identity theft monitoring for peace of mind and an additional layer of security.

DJ: How can businesses fight back?

Peters: Businesses are balancing adapting to the new digital environment and the prevalence of technology like generative AI with protecting themselves from fraud attacks.

Fraudsters and their schemes are becoming more sophisticated, so businesses need to be proactive about reviewing their fraud strategy and implementing the right approach to fraud prevention to protect themselves and their customers. Companies should work with a trusted partner who can help them review their portfolio, identify risk and put into place the right fraud solutions to fit their needs. A partner can help a business incorporate a multilayered approach to fraud prevention that leverages data, advanced analytics and insights to identify multiple types of fraud and mitigate loss.

Companies should also educate employees on emerging fraud trends so they can take extra steps to protect themselves and the company from additional risk.

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Written By

Dr. Tim Sandle is Digital Journal's Editor-at-Large for science news. Tim specializes in science, technology, environmental, business, and health journalism. He is additionally a practising microbiologist; and an author. He is also interested in history, politics and current affairs.

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