Results show synthetic fraud cases rising by 17% over the past two years, driven by AI-generated identities.
Deduce, the only patented technology platform designed to prevent AI-generated identity fraud, in association with Wakefield Research, today released a study showing alarming trends in synthetic fraud growth. The study, which polled 500 fraud and risk professionals at financial services and fintech companies in the United States, shows a 17% increase in synthetic fraud cases over the past two years, with more than a third of professionals reporting a significant surge of 20 – 50 percent.
Synthetic identities utilize a combination of legitimate personally identifiable information, such as social security numbers, and fabricated information designed to pass as a real human being. This type of identity fraud has been in use for decades but has been systematically growing in complexity. Thanks to the introduction of generative AI technologies, fraudsters are now turbo-charging synthetic identities to such a degree they will circumvent any existing fraud prevention solutions and escalation policies, including document verification and even manual reviews. The study indicates that while the industry invests in fraud prevention, 52% of experts believe that fraudsters are adapting faster than defenses can keep up.
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“Synthetic identity fraud has long been a significant challenge for the financial industry, but the advent of AI technology has accelerated the problem,” said Ari Jacoby, Deduce CEO. “Fraudsters are now able to create identities at an unprecedented pace, allowing them to play the long game with these personas. They can open accounts, make deposits, and engage in seemingly human-like interactions that pose an immense challenge for technology-based detection methods. Without better fraud prevention solutions, we can anticipate a spike in the financial impact associated with these identities.”
The research also reveals that 88% of experts anticipate the problem worsening before an effective solution is found. The increasing sophistication of fraudsters and their ability to adapt to evolving security measures create a formidable challenge for institutions trying to safeguard their assets and customer data.
“The data shows that this is a substantial and evolving threat,” said Nathan Richter, Senior Partner at Wakefield Research. “From increases in synthetic fraud and the actions they are taking to appear legitimate, to the concerns these fraud and risk professionals have that fraudsters are adapting faster than they can keep up with, it’s clear this is a serious challenge for the financial industry.”
This increase in synthetic fraud and the rising value of each incident underscores a systemic problem in how identities are analyzed today. As AI makes it more difficult to separate real people from fake, not only are financial institutions at risk of fraudsters applying for loans or credit, but they’re also at risk of offering it to criminals themselves. In fact, 53% of respondents said they had proactively offered credit to synthetic customers.
The joint study by Deduce and Wakefield underscores the need for the financial industry to enhance fraud prevention strategies and develop more effective countermeasures to address the rising threat of synthetic fraud. The pace of technological advancement and fraudster innovation demands a renewed focus on security measures.
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