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The Role of AI in Protecting Consumers and Businesses From Modern Fraud

By Andrey Stanovnov, CTO at IDScan.net

Artificial Intelligence (AI) is becoming a key tool for businesses as they confront the escalating challenges of modern fraud. Enhanced methods, including AI-generated deepfakes, are increasingly used by criminals to circumvent conventional security measures.

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IDScan’s VeriScan platform identified over 1,000,000 fake IDs last year alone, according to their 2024 Fake ID Report, underscoring the pervasive threat of fraudulent documents. This situation emphasises the immediate need for advanced defenses equipped to tackle AI-enhanced fraud tactics that pose significant risks to the protection of consumer data and business operations.

Here is how AI is reshaping safety measures across industries, providing businesses with the tools to stay one step ahead of cybercriminals, while ensuring a better experience for their consumers.

Fraudulent strategy advancements over the years

As technology progresses, so does the sophistication of criminal activities, especially with the use of technologies such as automation and AI. Fraudsters can go about their activity at an unprecedented scale and pace. AI-generated deepfakes represent one of the most concerning advancements in this area. These realistic forgeries can mimic voices, facial expressions, and personal data so effectively that they can often bypass traditional security and verification systems.

A recent example of the damaging potential of AI technology emerged from Hong Kong, where a finance worker at a multinational firm was tricked into paying out $25 million. Fraudsters used deepfake technology to impersonate the company’s chief financial officer during a video conference call. This elaborate scam involved multiple deepfake recreations of company staff, convincing the worker to authorize a massive financial transaction based on the perceived legitimacy of the participants making the request.

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This rise in AI-assisted fraud has only seen the tip of the iceberg; as these technologies develop, so too will the advanced methodologies used by cyber criminals. For organisations looking to safeguard their business and customers, a shift in how businesses approach identity verification is now a security imperative. Traditional methods that rely solely on physical checks or basic digital scans are no longer sufficient.

Innovating identity verification with AI

AI has become essential in strengthening verification processes against manipulation and security breaches. Modern ID verification systems employ a variety of techniques, including biometric analysis, and examining IDs using sophisticated AI-powered software that meticulously analyzes an ID’s physical characteristics right down to individual pixels. These systems can also scrutinize security elements that are visible only under ultraviolet and infrared light, ensuring the verification of document authenticity. This not only reduces the likelihood of human error but also drastically lowers the chances of fraud.

Facial recognition is another crucial tool for biometric verification. Face matching technology confirms that the person presenting the ID matches the document’s holder by checking their live appearance against the photo on the ID, reinforced with checks for biometric consistency and anti-spoofing measures.

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Lastly, augmenting these checks with data from third party sources allows AI to provide a confidence score in the legitimacy of the individual’s credentials, and the likelihood that the represent a risk to the business.

By adopting these technologies, companies can ensure a higher standard of security and a smoother experience for their customers, which can also help in environments such as the sale of age-restricted goods. These systems can accurately verify customer ages and ensure legal compliance, enhancing security and reducing operational costs by streamlining business transactions. Lastly, digital verification standardizes across all manner of accepted ID forms, again reducing human error for checking ID formats they may not be familiar with, such as driving licenses from different states and countries.

Consumer and business advantages of AI security

Statistically, businesses face substantial costs associated with fraud, with every dollar lost potentially costing three times more in cumulative expenses. This reflects not only direct financial losses but the broader impact on customer trust and the retailer’s reputation. Beyond fines, which can total in excess of $2,000 for a first offense, businesses can also lose their permit license to sell age-restricted products, impacting revenue to a far greater degree. Take the state of Iowa, for example, four sales of alcohol to underage minors in a three year span will result in the revocation of the selling license. In the UK, businesses can be fined up to £10,000 and have their license removed for repeatedly failing to catch fraudulent IDs used by minors.

The integration of advanced AI tools in identity verification processes not only mitigates these losses but also enhances the overall customer experience by ensuring that interactions are both secure and efficient.

Consumers also benefit from AI-enhanced verification through improved security and privacy. These systems reduce the risk of identity theft and ensure that personal data is handled securely, creating a safer, faster and less intrusive identity verification process.

AI’s dual role in fraud creation and prevention

As we look to the future, the battle between AI-enabled fraud techniques and anti-fraud measures is intensifying. Fraudsters are continually harnessing AI to develop more sophisticated methods of deception, however, AI is the very key to the detection of such methods.

To navigate the challenges presented by AI-driven fraud, there’s a clear need for businesses to take active steps toward safeguarding their operations. By adopting advanced AI-driven security solutions and committing to ongoing technological advancements, businesses can stay one step ahead and protect themselves and their customers from fraudsters’ evolving tactics.

[To share your insights with us as part of editorial or sponsored content, please write to psen@itechseries.com]

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