AI-powered fraudsters are overwhelming bank defenses, Treasury report says

By Chris Matthews

Internet crime cost Americans $12.5 billion in 2023

U.S. banks are struggling to keep up with evolving artificial-intelligence technology that has enabled fraudsters to easily impersonate customers and spread malware using AI-generated text, according to a report published Wednesday by the Treasury Department.

"The financial services sector is increasingly subject to costly cybersecurity threats and cyber-enabled frauds," according to the report, which was compiled based on 42 in-depth interviews with bank executives in late 2023.

"As access to advanced tools becomes more widespread, it is likely that, at least initially, cyberthreat actors utilizing emerging AI tools will have the advantage by outpacing and outnumbering their targets," the report said.

Individuals and businesses in the U.S. are increasingly threatened by malicious actors online that use a wide range of tools to defraud their victims.

The FBI's Internet Crime Complaint Center received more than 880,000 complaints in 2023, with potential losses exceeding $12.5 billion, a 22% increase from the year before.

Financial institutions interviewed by Treasury officials said they are particularly concerned about developments in so-called deepfake technology that could allow bad actors to impersonate employees or customers in order to thwart traditional antifraud protocols.

The South China Morning Post reported last month that a multinational company based in Hong Kong was defrauded of $26 million after scammers digitally produced a video showing what appeared to be the company's chief financial officer ordering several money transfers.

The institutions also warned that generative-AI technologies like ChatGPT enable malicious foreign actors to create text that appears to be written by a native speaker, which can be used to make phishing emails more effective.

The report calls on the financial-services industry to collaborate to set new best practices and to share data that will enable them to thwart these new approaches to fraud.

The report was compiled after President Joe Biden signed an executive order directing federal departments and agencies to collaborate with industry to ensure responsible innovation with AI technology.

"Artificial intelligence is redefining cybersecurity and fraud in the financial services sector, and the Biden administration is committed to working with financial institutions to utilize emerging technologies while safeguarding against threats to operational resiliency and financial stability," Nellie Liang, undersecretary for domestic finance, said in a statement.

"Treasury's AI report builds on our successful public-private partnership for secure cloud adoption," Liang said, "and lays out a clear vision for how financial institutions can safely map out their business lines and disrupt rapidly evolving AI driven fraud."

-Chris Matthews

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03-27-24 0900ET

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