Financial fraud has always been a threat. However, with the use of artificial intelligence (AI) on the rise, cyber criminals are becoming increasingly sophisticated. AI fraud is a broad area that encompasses various schemes in which AI is either exploited for fraudulent activities or targeted by attackers. Because these scams use such modern advances, they often fly under the radar, making them dangerous to unsuspecting victims.
This year, knowledge is power. Want to keep your finances safe? Here are the most common types of AI fraud you should be aware of.
Types of AI Fraud
While you don’t need to live in fear, it’s worthwhile to understand the threat landscape. Knowing what types of AI fraud you’re up against can help you prepare your accounts and stay vigilant, even if you feel you’ll never be targeted. Below are some of the most common forms of fraud using artificial intelligence:
Synthetic Identity Fraud
Scammers use generative AI fraud to combine stolen data — like Social Security numbers and addresses — with fabricated information to create synthetic identities. Attackers open bank accounts, apply for loans, or make fraudulent purchases with these identities. Per StateScoop, synthetic identity fraud was the fastest-growing form of fraud in 2024, making identity verification critical for AI fraud detection.
Deepfake Fraud
AI-generated deepfake audio, video or images can impersonate executives or authorized personnel, tricking organizations into transferring funds or disclosing sensitive financial information. Often, these creations can be very convincing and lifelike, making them difficult to distinguish from legitimate media. They’re used to create fake identification documents, bypass customer verification checks, orchestrate disinformation campaigns and perpetrate other financial crimes.
Phishing and Spear Phishing
AI-driven tools analyze targets’ behavior and craft highly convincing phishing emails or messages to steal financial credentials or install malware. These personalized messages pretend to be from legitimate businesses like banks or companies, aiming to trick you into giving away personal information or clicking on bad links. Unfortunately, 60% of people fall victim to AI-automated phishing, according to Harvard Business Review.
Automated Trading Manipulation
Fraudsters use AI algorithms to engage in market manipulation tactics such as spoofing (placing fake buy/sell orders) or pump-and-dump schemes to inflate stock prices. This type of AI scam utilizes the technology’s abilities to trade large blocks of stock or financial assets and spread misinformation to impact the market.
Key Risk Factors To Watch Out For
Identifying signs of potential fraud is the first step in preventing it. Want to stop advanced fraud in its tracks? Keep an eye out for these red flags:
Social Engineering via AI
AI can craft highly personalized phishing messages or calls that mimic legitimate communications from banks. These messages may include accurate personal details, making them seem even more credible.
Awareness tip: Be cautious of unexpected messages, especially those requesting sensitive information or urging immediate action. Validate the communication by contacting the source directly.
Account Takeover
AI-powered bots can use stolen credentials to bypass security measures and gain unauthorized access to accounts. They may also exploit security vulnerabilities to escalate privileges or lock out legitimate users.
Awareness tip: Use strong, unique passwords and enable multi-factor authentication (MFA). Regularly monitor account activity for unauthorized transactions or changes.
Manipulated Banking Apps or Chatbots
Fraudulent AI chatbots or cloned banking apps can trick users into revealing login credentials. These apps often mimic the design and functionality of genuine financial services platforms to deceive users effectively.
Awareness tip: Only download apps from official app stores and verify the source of online chat interactions. Report suspicious apps or chat behaviors to the official institution immediately.
Payment Fraud
Scammers may use AI to generate legitimate-looking transaction requests or invoices. They may also employ deepfake voices or videos to impersonate trusted individuals during payment authorization.
Awareness tip: Double-check payment requests, especially large or unusual ones, with the requester. Always verify invoices with known contacts using a different communication channel to reduce financial losses.
Fraud Prevention Strategies: How To Stay Safe
Being aware of warning signs is only half the battle; you must also know what next steps to take when you notice suspicious behavior. Follow these safety tips to secure your accounts and keep your money out of reach of unauthorized individuals:
- Use strong passwords: Create unique, complex passwords that combine letters, numbers and special characters.
- Enable multi-factor authentication: Require additional verification, such as a text code or biometric scan, for account access.
- Regularly update passwords: Change passwords every few months to reduce the risk of breaches.
- Avoid immediate action requests: Be cautious with calls, emails or messages that urge immediate actions, such as fund transfers.
- Contact directly: Use official bank contact numbers or websites to confirm suspicious messages or transactions.
Visit our website Security Center for essential tips and resources for keeping your finances safe from potential fraud.