Friday's Final Word | week 4
Welcome to another edition of our Financial Crime Newsletter where we delve into the most important developments in the sphere, from AI-powered crime to Metaverse challenges. Stay tuned and have a great day!
???AI changing the scam landscape
?? Chinese Bank fined in New York
?? Fighting GenAI powered fraud in 2024
?? Interpol White Paper on “Metacrime”
?? Analysing IMF’s 5-point AI plan
AI heralds the next generation of financial scams?
The obsession with AI is nowhere near fading, but unfortunately, it’s not only students and journalists using it for writing, but scammers as well, devising different methods to trick their victims into paying. And while law enforcement agencies and financial crime companies are utilizing the same technology, never letting criminals slip away and disappear, the sophistication of AI tools is making it increasingly hard to distinguish between fake and real. Liveness checks and the use of biometrics are still effective against synthetic fraud and deepfakes, voice cloning on the other hand is proving harder to be detected. If the technology keeps improving with the same pace, then the danger is there that after years of decline, fraud might begin surging. Currently, the good and the bad guys are caught up in a cat-and-mouse game, but if we look away, with the help of AI, the mouse could potentially manage to escape.
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Chinese bank ICBC’s New York subsidiary fined for deficient AML compliance
The crackdown on banks underperforming their AML duties continues with the Industrial and Commercial Bank of China (ICBC) and its New York City branch being the latest to be fined for inadequate compliance. From backdating formal documents to unsatisfactory customer due diligence, the Chinese lender’s New York arm has been deficient on many different levels. The investigation conducted by the FED in coordination with NYDFS has resulted in penalties adding up approximately $32.4 million and the requirement to remedy past weaknesses.
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How to fight GenAI powered fraud in 2024
Generative AI is here, and when it comes to fraud, criminals are already making use of it. From AI bots scrapping the internet to create Frankenstein-style synthetic identities to criminal versions of ChatGPT, such as WormGPT and FraudGPT, writing convincing phishing emails, the digital world has never been so exposed to such a large volume of fraudulent activity, and consequently, financial institutions have never been flooded with so many fake identities. However, while fending off AI-fueled attack is becoming more complicated, there are a number of steps one can take to mitigate verification and authentication risks. Reducing reliance on compromised technology is a good starting point, and embracing AI to verify multiple datapoints simultaneously and seamlessly is another effective method one can embrace. Resultingly, the fight against financial crime doesn’t have to become bumpy, one just need pick the right tools, and let them do the trick.
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Grooming, radicalization and cyber-attacks: INTERPOL warns of ‘Metacrime’
The Metaverse seems to be more than just Mark Zuckerberg’s pet project, as according to a recent Interpol Whitepaper, it might be the next frontier for law enforcement. The Interpol analysis explores the key challenges from a security perspective, detailing the different types of “Metacrimes” that will be unleashed. And the catch is – a maze of virtual crime scenes where physical evidence is not a real thing. This loophole creates opportunities for a whole new list of criminal activities, further complicated by a lack of international boundaries. However, in addition to criminal advantages, there are as well law enforcement benefits, from the ability to preserve crime scenes to the possibility of immersive training. Every coin has two sides, so the only question is, which side one picks.
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Making sense of IMF’s 5-point AI regulation action plan
How should AI be regulated? Just by looking at the news articles from this week, it’s immediately obvious that AI didn’t just come with a grand promise, but it’s already delivering, from fraudulent scares to improved enforcement techniques. But while the industry has been quick embracing the technology, regulators are grappling with the task of regulating it properly, and as the dangers and threats are very real, imposing regulation and adequate guardrails seems more than necessary. Hence IMF’s 5-point action plan laying down the principles that should be included when governing the future of the technology. As the essence of the technology is that it’s changing dynamically, it should come as no wonder that agility should be part of any regulatory package. Instead of aiming for a one-size-fits-all solution which will obviously fail spectacularly, regulators should aim for a balancing act that is both holistic and case-specific.
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