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What can the financial services industry do about AI-enabled fraud?
Insight from
-
Irene Direnko-Smith
When it comes to financial fraud, spotting a single fake document, with just one or two details out of place, was once the key to unlocking a criminal conspiracy. But modern AI tools make it possible to create a galaxy of fake documentation, all internally consistent and plausible on manual review. What can financial services organisations do to counter this threat?
The age of AI-enabled fraud begins
As AI tools grow more sophisticated, it’s becoming dramatically easier for criminals to generate fraudulent documents that appear authentic on manual review. Earlier this year, Australia’s Commonwealth Bank reported itself to police and regulators over what it believed were AU$1 billion in home loans obtained fraudulently, including via AI-generated documents. This won’t be the only financial services company experiencing this level of fraud (and the financial services industry is not the only target).
Beyond faking an individual document, AI has made it easier to fabricate entire fake narratives, creating multiple documents that all appear to support an underlying deception. While a single fake document may once have been easy to spot, when confronted with a collection of phony documents that all appear consistent with one another, it’s harder to spot issues that may raise red flags.
With New Zealand Know Your Customer requirements mandating financial services companies identify their customers, understand the nature of their activities, and assess any money laundering risks, the ability of a fraudster to generate an entire false reality increases compliance risk.
What can financial services organisations do to respond to this new reality?
To catch an AI-enabled fraudster, you need an AI tool of your own
If AI has made it difficult or impossible to detect fraud using human judgment alone, especially at scale, what can organisations do to ensure they operate with confidence?
The solution starts with accepting this new reality. This new world of smoke and mirrors requires increased scepticism and a greater emphasis on independent verification. But it’s not just about asking more questions or stress testing a story more thoroughly. It’s about leveraging advanced technology to look for the telltale signs of fraud, some of which are invisible to the human eye.
Enter: Fraud Check AI, a fraud detection tool we’re offering in partnership with Australian business DoxAI.
Fraud Check AI reviews documents such as identity papers, payslips, financial statements and other supporting records. It performs checks at three levels:
Static checks: These analyse the file itself: the metadata, timestamps, embedded objects, fonts, and encoding.
Dynamic checks: These analyse the internal logic, as well as the external validity, of the document. Do the dates match? Is income overstated? Does what is written actually make sense? Also: does this company exist on the Companies Register?
Custom checks: These are specific to the organisation. In the case of a financial services company, this may be a credit policy or risk appetite. They ask, does the document meet our standards?
Fraud Check AI can also check between documents, for example to confirm a payslip and a bank statement are consistent with each other. As we’ve discussed, this is vital in the new world of AI-enabled gaslighting at scale. Crucially, it can do these checks with 98-99% accuracy.
The product was built with Australasian regulations and compliance frameworks in mind, meaning New Zealand financial institutions can deploy the system more quickly and improve performance on the types of records commonly handled in New Zealand and Australia.
Read more of our recent insights.
Irene Direnko-Smith
- Head of Process Automation
- Fujifilm Business Innovation New Zealand
With 20 years of industry experience, Irene is passionate about helping Kiwis work smarter, delivering innovative solutions to solve complex business challenges.
Irene leads the Process Automation team at FUJIFILM Business Innovation NZ, recognised for its expertise and commitment to customer success.
Irene and her team specialise in streamlining business processes through platforms like Microsoft, Esker, Tungsten, DocuSign, and more, driving efficiency and transformation across diverse industries.