As long as there is evolving technology, there will be evolving fraud; however, there are ways to protect individuals and companies from the increasing threat of cyber-fraud
The shift towards digital platforms has revolutionized financial transactions, but it has also fueled a surge in fraudulent activities, particularly identity theft cases that are driven by cyber-attacks. Cybercriminals, leveraging stolen identity information, have devised sophisticated schemes, complicating fraud mitigation efforts. And with the frequency of cybersecurity incidents on the rise each year, organizations face a mass of threats like ransomware and data theft, posing significant challenges across industries.
The average cost of a data breach reached an all-time high of $4.45 million in 2023, and now, artificial intelligence (AI) has led to a significant increase in the sophistication of cybercrime. From deepfake technology to AI-powered hacking, cybercriminals are exploiting these advancements to orchestrate unique attacks.
How criminals are leveraging AI
Deepfake technology — One of the most concerning developments is the use of deepfake technology, a blend of machine learning and media manipulation that allows cybercriminals to create convincingly realistic synthetic media content. Criminals then use deepfakes to spread misinformation, perpetrate financial fraud, and tarnish reputations, exploiting the trust we place in digital media.
In a recent 2024 incident reported by Hong Kong police, a company suffered a loss of $25 million due to the deception of an employee who fell victim to deepfake impersonations of his colleagues. The individual participated in a video call in which deepfake versions of the company’s United Kingdom-based CFO and other team members were present. According to authorities, scammers engineered these deepfakes using publicly accessible video content.
AI-powered password cracking — AI algorithms, including machine learning and deep learning, enable systems to identify patterns and make predictions based on vast datasets. For example, PassGAN, an AI-driven password-cracking tool, harnesses machine learning algorithms that operate within a neural network framework. And the tool seems to work, as a study showcasing the effectiveness of PassGAN in password cracking, published by Home Security Heroes, found that 51% of passwords were cracked in less than a minute, 65% in less than an hour, 71% within a day, and 81% within a month.
The impact of identity theft fueled by cyber-crimes
Further, there has been a 15% increase in the number of data breaches in the United States between 2022 and 2023, which underscores the escalating threat posed by cybercriminals, according to the TransUnion 2024 State of Omnichannel Fraud Report. Concurrently, breach severity surged by 11%.
Further, digital account openings emerged as the top highest risk with 13.5% of all global digital account openings suspected of fraudulent activity. And 54% of consumers across 18 countries and regions reported being targeted by various forms of fraud attempts between September and December 2023, according to the TransUnion report.
Cybercriminals persist in breaching organizations’ systems to steal consumer identity credentials, which often contain critical information such as an individual’s date of birth, full Social Security number, and residential address. With a wealth of stolen identity credentials readily available, criminals have become increasingly adept at fabricating identities.
Consequently, this has led to an increase in the use of illicit synthetic identities among accounts opened at US lenders such as auto loans, bank credit cards, retail credit cards, and unsecured personal loans. The surge in this synthetic identity fraud has exposed lenders to potential losses totaling $3.1 billion, representing an 11% increase compared to the end of 2022. Cybercrimes, including identity fraud, are projected to cost the world about $9.5 trillion annually by the end of 2024, according to AuthenticID’s State of Identity Fraud Report 2024.
JPMorgan Chase: Battling cyber-threats
JPMorgan Chase’s CEO Jamie Dimon has identified cybersecurity as the “biggest threat” facing the financial services industry. This recognition comes in the wake of legal action taken against the bank in January 2023, when a subsidiary of EssilorLuxottica filed a lawsuit alleging negligence in addressing signs of fraud. The lawsuit claimed that JPMorgan’s oversight facilitated cybercriminals in orchestrating 243 fraudulent transactions, resulting in the siphoning off of $272 million from Essilor’s manufacturing division.
Since then, JPMorgan has intensified its focus on strengthening cybersecurity measures. A recent disclosure by a JPMorgan executive revealed that the bank repels an astounding “45 billion” cyberattack attempts each day. In response to the escalating efforts of hackers, JPMorgan allocates a substantial portion of its $15 billion budget towards cybersecurity initiatives, backed by a dedicated workforce of 62,000 individuals committed to defending against cyber-threats.
Key strategies for cyber-defense
There are several tactics that organizations can take to help mitigate cyber-crime, including:
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- Prioritize investments in comprehensive cybersecurity infrastructure, equipped with advanced threat detection and response capabilities, to effectively safeguard against cyber-attacks.
- Collaborate closely with regulatory authorities to establish and adhere to rigorous compliance measures, ensuring adherence to industry regulations and standards for data protection and financial security.
- Embrace cutting-edge technologies such as AI to better develop sophisticated fraud detection systems capable of identifying and mitigating evolving threats in real-time.
- Establish multidisciplinary teams including experts from fraud, cybersecurity, risk management, and data analytics departments to leverage diverse skill sets and perspectives in developing comprehensive security strategies. Encourage regular knowledge-sharing sessions, joint brainstorming, and collaborative projects to foster a culture of teamwork and innovation. By breaking down silos and promoting collaboration across departments, financial institutions and organizations can enhance their ability to detect, prevent, and respond to emerging threats effectively.
- Launch targeted educational campaigns to inform customers about common fraud tactics and cybersecurity measures. Offer easily accessible resources such as online tutorials and workshops to empower customers to protect themselves from cyber-threats.
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In conclusion, ensuring financial integrity demands every organization’s constant attention, especially considering the rapid growth of cyber-threats. By fostering a culture of strength, innovation, and collaboration, leaders can effectively address the challenges posed by data breaches and fraud.
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