A Entrust study has shown that digital fraud has over taken physical fraud for the first time, as the financial sector sees a surge in AI-powered frauds.
In the landscape of financial crime, a seismic shift is underway, one that is reshaping the very nature of fraud itself.
The Entrust Cybersecurity Institute’s latest Identity Fraud Report has unveiled a startling transformation: for the first time in history, digital document forgery has overtaken physical counterfeits as the primary method of fraud.
This pivotal moment marks not just a change in tactics, but a fundamental reimagining of how fraudsters operate in our increasingly digital world.
At the heart of this transformation lies AI, a tool that has become both the sword and shield in the ongoing battle against financial crime.
The dawning of digital forgery
As AI continues to advance, it is not only driving innovation in legitimate financial services but also arming fraudsters with unprecedented capabilities.
According to the report, digital document forgeries now account for 57% of all document fraud, marking a staggering 244% increase from 2023 and an almost unbelievable 1,600% surge since 2021.
This dramatic shift underscores the rapid pace at which fraudsters are adapting to and exploiting the digital landscape.
“The drastic shift in the global fraud landscape, marked by a significant rise in sophisticated, AI-powered attacks, is a warning that all business leaders must heed,” says Simon Horswell, Senior Fraud Specialist at Entrust.
The surge in digital forgeries comes at a time when the financial sector is increasingly reliant on digital documents for remote banking and online services.
The Covid pandemic accelerated the adoption of digital banking solutions, creating a fertile ground for fraudsters to exploit.
As financial institutions rushed to digitise their services, the attack surface for potential fraud expanded exponentially.
AI: the double-edged sword
The rise of AI-assisted fraud has empowered bad actors with sophisticated tools to create convincing forgeries, particularly targeting National ID Cards, which account for 40.8% of attacks globally.
This trend is part of a broader shift towards “fraud-as-a-service” platforms, where criminal enterprises share best practices and leverage Gen AI tools to create increasingly sophisticated attacks.
The proliferation of deepfake technology further compounds this issue. The Entrust report reveals that deepfake attacks occurred at a rate of one every five minutes in 2024.
Unlike traditional phishing tactics, which often rely on human error, deepfakes can potentially fool even the most vigilant individuals and advanced security systems.
The financial services sector remains the primary target for these advanced fraud techniques.
Cryptocurrency platforms, in particular, have seen a 50% year-over-year increase in fraudulent activity attempts, rising from 6.4% in 2023 to 9.5% in 2024.
This surge coincides with cryptocurrency reaching all-time price highs, making it an attractive target for fraudsters.
Traditional banks have not been spared, experiencing a 13% increase in fraudulent onboarding attempts.
This uptick occurred against a backdrop of high inflation rates, which led to a rise in lending and mortgage scams.
The economic context has created a perfect storm, where financial pressures make individuals more susceptible to sophisticated fraud attempts.
Fighting fire with fire
As the nature of fraud evolves, so too must our defences. Financial institutions are increasingly turning to AI to combat these emerging threats.
“To stay ahead, security teams must proactively adapt their strategies, prioritise monitoring these emerging threats, and prepare their organisations to face this new reality. It’s no longer optional; it’s imperative,” says Simon.
Experian exemplifies this trend by using data from multiple trusted sources to enrich its extensive credit bureau data on the UK population, and to verify veracity of consumer identities online.
However, the battle against AI-powered fraud is not without its challenges. A survey by ComplyAdvantage revealed that while 89% of consumers express concern about fraud, only 40% are comfortable with the prospect of banks using AI to fight financial crime.
As we look towards 2025 and beyond, it’s clear that the nature of fraud has fundamentally changed.
The shift from physical to digital fraud, accelerated by AI, represents a new frontier in financial crime.
To stay ahead, financial institutions must not only invest in cutting-edge AI technologies but also work to build trust with consumers about the use of these tools in protecting their financial well-being.
The age of AI-powered fraud is upon us, and the financial industry stands at a crossroads. How it responds to this challenge will shape the future of financial security for years to come.
