- Financial organizations can make use of AI to improve cybersecurity and fraud protection
- Security risks from fraudsters using artificial intelligence
- What does this have to do with cryptocurrency?
The U.S. Treasury Department has published a report on the state of AI-related cybersecurity and fraud risks in the financial services industry. It details current AI uses, threats, risks, and best practices for financial institutions and other key stakeholders.
“Artificial intelligence (AI) holds extraordinary potential for both promise and peril. Responsible AI use has the potential to help solve urgent challenges while making our world more prosperous, productive, innovative, and secure. At the same time, irresponsible use could exacerbate societal harms such as fraud, discrimination, bias, and disinformation; displace and disempower workers; stifle competition; and pose risks to national security. Harnessing AI for good and realizing its myriad benefits requires mitigating its substantial risks. This endeavor demands a society-wide effort that includes government, the private sector, academia, and civil society.”
Financial organizations can make use of AI to improve cybersecurity and fraud protection
The report says that many financial organizations are using AI to improve employee efficiency in research and reporting. Some have been using AI for fraud detection for more than a decade. The use of AI and other technologies to mitigate risk is becoming increasingly important due to the advances achieved by threat actors, from hackers to nation states.
Recent innovations in machine learning have greatly expanded the transformative potential of AI in detecting, preventing, and even predicting illicit activity.
However, while agencies are using AI to mitigate fraud and cybersecurity risks, the report notes that AI presents new and dangerous cybersecurity and fraud risks.
Security risks from fraudsters using artificial intelligence
According to the report, when it comes to cybersecurity risks, “Concerns identified by financial institutions are mostly related to lowering the barrier to entry for attackers, increasing the sophistication and automation of attacks, and decreasing time-to-exploit. Generative AI can help existing threat actors develop and pilot more sophisticated malware, giving them complex attack capabilities previously available only to the most well-resourced actors. It can also help less-skilled threat actors to develop simple but effective attacks.”
The Treasury Department claims that fraudsters have turned to artificial intelligence to create better fakes that more believably mimic voice and other human characteristics. In addition, AI is being used by fraudsters to improve the ability to create synthetic IDs, which is the creation of fake IDs using the aggregated personal information of various real people to open bank accounts, credit cards, cryptocurrency, and other financial accounts.
What does this have to do with cryptocurrency?
While the report does not specifically address the risks and opportunities of artificial intelligence when it comes to the digital asset space, most of the best practices outlined in the report are applicable to virtual asset service providers. In fact, as North Korea and other threat actors continue to attack the crypto ecosystem at an alarming rate and scale, leveraging AI to strengthen cyber defenses is critical.
Fraud is a frequent occurrence in the crypto sphere. According to a new report from TRM Labs, $12.5 billion worth of fraud accounted for a third of all illicit funds in the crypto ecosystem in 2023. In 2023, $1.5 billion more funds were sent to fraudulent organizations than in 2022 – an increase of 11%. The data includes total funds sent to addresses linked from TRM’s perspective to fraud; some funds appear to be part of revenue laundering. Financial pyramid schemes are the most common: about $6.6 billion in 2023.
Given the threat that fraud already poses to the crypto ecosystem, the Treasury report is an important reminder that attackers will use AI and other new technologies for illicit purposes.
Most importantly, however, it is a reminder that the technology itself is neither good nor evil, that it can bring both tremendous promise and new dangers. As the White House writes in its Executive Order on AI, “In the end, AI reflects the principles of the people who build it, the people who use it, and the data upon which it is built.”
