FinCEN Warns Financial Institutions of Rising Threat of Deepfake Fraud

The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an alert warning financial institutions about the rising threat of deepfake media fraud schemes that leverage generative artificial intelligence (GenAI) tools to perpetrate financial crimes. This warning comes amid a surge in AI-powered fraud attempts that have targeted major financial institutions since late 2023.

FinCEN has documented an increasing number of suspicious activity reports from financial institutions describing suspected deepfake media usage in fraud schemes targeting both institutions and customers. This trend, which emerged in 2023, has continued to accelerate through 2024, paralleling the wider adoption of accessible GenAI tools and sophisticated image manipulation technology.

According to the alert, criminals are primarily using GenAI to alter or create fraudulent identity documents to bypass verification systems. These sophisticated deepfakes can generate highly convincing synthetic images for identification documents such as driver’s licenses and passports. This development has prompted several major identity verification providers, including Nametag and IDVerse, to introduce specialized deepfake detection capabilities in their platforms.

FinCEN Director Andrea Gacki stated, “While GenAI holds tremendous potential as a new technology, bad actors are seeking to exploit it to defraud American businesses and consumers, to include financial institutions and their customers. Vigilance by financial institutions to the use of deepfakes, and reporting of related suspicious activity, will help safeguard the U.S. financial system.”

The agency has outlined several detection and mitigation strategies, including re-reviewing account opening documents, conducting reverse image searches, and implementing live verification checks. However, FinCEN notes that fraudsters may attempt to circumvent these measures using technical glitches or synthetic responses.

Key red flag indicators identified by FinCEN include photos or videos flagged by deepfake detection software, inconsistencies in geographic or device data, suspicious transaction patterns, and the use of third-party webcam plugins that enable pre-recorded video playback. These indicators build upon existing fraud detection frameworks while addressing the unique challenges posed by GenAI technologies.

The alert also warns of sophisticated social engineering attempts using GenAI, including business email compromise schemes, spear phishing attacks, and various scams targeting elderly individuals or virtual currency investments. Criminals may employ deepfake voices or videos to impersonate trusted individuals in emergency fraud schemes, a tactic that has become increasingly common as voice synthesis technology has improved.

Financial institutions are required to reference “FIN-2024-DEEPFAKEFRAUD” in their suspicious activity reports when documenting potential deepfake-related incidents. This standardized reporting requirement will help authorities track and analyze the evolution of GenAI-enabled fraud attempts across the financial sector.

Source: FinCEN Alert

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November 15, 2024 – by Cass Kennedy