Expert sounds alarm bells over AI-powered cyber fraud during festive season

Amid the festive fervour, where we’re seeing the usual excitement around online shopping and holiday deals, experts are raising alarms about a potential new threat – AI-powered cybercrimes, which could lead to a significant spike in financial frauds.

While there hasn’t been a notable surge yet, the fear is that AI-driven phishing attacks, deepfakes, and adaptive scams could become a major force this season. The sophistication of AI allows cybercriminals to create convincing emails, fake order confirmations, and impersonations that are increasingly hard to detect, potentially leading to a surge in financial scams.

Here are some areas where AI’s influence could be seen:

• AI-powered phishing attacks that are harder to spot and could trick consumers into sharing personal and financial details.
• Deepfakes impersonating customer service agents or brands, leading victims to unknowingly provide banking information.
• Automated, adaptive scams that evolve in real-time, making financial fraud operations more efficient and widespread.

In conversation with Adgully, Dhiren V Dedhia, Head of Enterprise Solutions at CrossFraud, an enterprise risk management platform from Manipal Technologies, elaborates on how AI-powered cybercrimes could lead to a significant spike in financial frauds amid the festive fervour and the increasing shift to online shopping.

Could you elaborate on how AI-driven phishing attacks, deepfakes, and adaptive scams work, and what makes them particularly challenging to detect? What are some notable examples of such AI-powered cyberfrauds that have occurred in recent times?

Financial fraud has become much more advanced over the years. Technological advancements have made AI-driven phishing attacks, deep fakes, and adaptive scams more sophisticated and harder to detect. More fraudsters have started using AI to mimic human behaviour and adapt in real-time. For example, phishing attacks now use AI technology to personalize messages to make them appear more credible by analyzing user data, social media activity, and communication patterns. These emails or texts are tailored to look like they're coming from trusted sources, leading victims to unknowingly share sensitive information.

On the other hand, deep fakes use AI to create hyper-realistic audio, video, or images that impersonate people. This technology has been used in scams, where AI-generated voices of CEOs authorize fraudulent transactions, fooling employees or even entire companies. At the same time, adaptive scams combine AI with machine learning to evolve based on the victim’s responses, adjusting their tactics to improve success rates. This adaptability makes these scams incredibly dynamic and harder to pin down.

Last year, India recorded one of the first deep fake fraud cases in the country. A 73-year-old man received a video call from someone impersonating his former colleagues, convincingly replicating their face and voice to request money. The victim transferred the funds before realizing the fraud. It was investigated, and authorities linked it to a Maharashtra-based account. These threats highlight the need for continuous advancements in cybersecurity measures to counter AI-powered frauds.

During the festive season, what are your biggest concerns regarding AI-powered cyberfrauds, and how do you think they will impact online shoppers?

The rise in online shopping activity during the festive season increases the risk of AI-powered cyber fraud. One of the biggest concerns is phishing scams and identity theft, where AI-driven tools mimic legitimate websites and emails with high accuracy. This can easily deceive shoppers into sharing sensitive information like card details or login credentials while making a purchase. Also, using deep fake videos or voices is another tactic used by fraudsters that can manipulate customers into trusting fraudulent schemes or fake customer service calls. AI-powered bots may also take over compromised accounts to make unauthorized purchases or withdraw funds.

Also, we’ve seen a lot of scams lately where people try to trick others into scanning bad QR codes. These scammers often use fake ads online, saying you have to pay right away with a QR code. Not just this, scammers are getting smarter with gift card scams. They send messages saying you’ve won a gift card, but you have to give them personal information or pay a little money to get it. They do this around holidays when people are excited about giving and getting deals.

These frauds impact not just individual consumers, but the overall trust in e-commerce platforms. Online shoppers could become more hesitant, which might affect sales. It’s important that businesses and consumers prioritize cybersecurity measures like two-factor authentication and AI-driven fraud detection systems. It will help mitigate the risks of cyber threats.

Looking ahead to the future, how do you envision the landscape of AI-powered cyberfrauds evolving, and what strategies should organizations implement to stay ahead of these threats?

As technology becomes more advanced, the instances of cyber fraud will potentially increase. They will become more tailored, making it harder for individuals and organizations to identify fraudulent activity. To address this, organizations must adopt a proactive, multi-layered security approach to stay ahead of these evolving threats. This includes leveraging AI for defensive purposes, such as using machine learning algorithms to detect anomalies in real-time, implementing predictive analytics to anticipate threats, and continuously monitoring systems for unusual patterns. Additionally, regular employee training on cybersecurity best practices is essential, as human error remains a key entry point for cybercriminals.

What collaboration efforts are necessary between financial institutions, law enforcement, and technology providers to combat AI-powered financial fraud?

To combat fraud, industries need to collaborate and share intelligence. Financial institutions must invest in advanced AI-driven systems that detect suspicious patterns in real-time. However, this alone won’t be enough. It is important that law enforcement gets timely access to any potential threat so that they can respond swiftly. This requires a seamless flow of information as well as robust regulatory guidelines.

Also, technology companies play a big part in fighting financial fraud. They create new tools that help stay ahead of scammers. These companies work closely with banks and other financial institutions to make these tools easy to use. Regular updates and sharing of best practices are important to stay ahead of new tactics. By working together, these industries can build a safer financial environment. This is especially important now that scammers are using AI.

What are some red flags or warning signs that consumers should be aware of to avoid falling prey to AI-powered financial scams during the holiday season?

One of the first potential red flags is receiving unsolicited emails or messages offering deals that seem too good to be true. Scammers use AI to craft personalized, convincing messages that mimic trusted brands. Always verify directly with the official source before clicking on any links. Also, keep an eye on subtle changes in web addresses or email domains. AI can generate phishing sites that look nearly identical to real ones, but may have slight differences, like misspelt URLs or added characters.

Moreover, cybercriminals are sending fake emails or texts that look like they’re from real stores. They say you ordered something you didn’t. If you try to cancel this fake order, they’ll send you to a fake website that steals your information. Scammers are also using social media to offer fake deals or contests. They try to scare people into thinking they’ll miss out on good deals, so people give them personal information or money. Beware of suspicious communication, whether through text messages, emails or calls.

Most importantly, do not revert to requests for personal information, especially payment details or passwords. Legitimate companies will never ask for sensitive information over email or text. Most scammers have started resorting to high-pressure tactics like limited-time offers or threats of account closure if action isn’t taken immediately. They use these tricks to create urgency, reducing the time for rational decision-making. Consumers must remain vigilant, verify communications, and use trusted platforms to protect themselves against these AI-enhanced threats.

How can organizations balance the benefits of AI-driven technologies with the potential risks of AI-powered cyberfrauds?

AI-driven technologies offer significant advantages for organizations, such as improving efficiency, automating repetitive tasks, and providing real-time data analysis. However, these benefits come with the increasing risk of AI-powered cyber fraud. It can lead to vulnerabilities in digital systems. To balance these benefits and risks, organizations need a multi-layered approach. They should invest in AI-based security systems. These systems can detect and respond to threats in real-time, mitigating the impact of cyberattacks. Also, organizations should implement strong data encryption and regularly update security protocols to safeguard sensitive information.

At the same time, employee awareness and training are equally important. Since cybercriminals often target human vulnerabilities, organizations must educate their teams on recognizing phishing attempts, social engineering, and other cyber threats. Last but not least, adopting ethical AI practices and ensuring transparency in AI decision-making can help identify anomalies that signal fraud attempts. By combining advanced technology with strong security measures, organizations can use technology to address the risk of potential fraud.

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