Global fraud attacks rise 19% amid AI exploitation

LexisNexis Risk Solutions has published its latest Global State of Fraud Report, revealing a 19% year-on-year increase in global fraud attacks, largely driven by the exploitation of AI technology.

Despite the rise in fraudulent activities, the report indicated that less than 10% of identified mules are arrested, and fewer than 1% are charged. This low enforcement rate contributes to the ongoing challenges in combating fraud effectively.

The report suggests that global organisations can enhance their ability to detect high-risk transactions significantly by integrating shared fraud intelligence into their risk assessments. This collaborative approach enables businesses to build digital trust and prevent fraud, with some organisations reporting customer recognition rates as high as 94% and a 26% improvement in fraud capture rates through digital identity and email intelligence integration.

Stephen Topliss, Vice President of Fraud and Identity at LexisNexis Risk Solutions, highlighted the dual impact of evolving consumer demands and fraud threats, noting, "Consumers' desire for faster, instant service is driving demand for change, including the creation of alternative payment solutions. In response, regulators and central banks are enabling systems, such as instant payment rails, which make transactions easier."

"However, every attempt to make transactions easier for consumers also makes life easier for fraudsters. Societal demand for convenience has left financial institutions facing a difficult balancing act to deliver technological innovation and convenience while maintaining trust and system integrity."

The report examined global trends and reported that only 60% of organisations employ technological solutions for fraud prevention across all transaction channels. In the regions of EMEA and APAC, the use of consortia or data exchange initiatives is even lower, with only 27% of organisations participating in such collaborative efforts.

A shared collaborative network facilitates the detection of suspicious activity and confirmed fraud events by allowing member organisations to share digital signals and risk-related data. The effectiveness of this approach is highlighted by cases where a major global bank improved its fraud detection capability by 17 times and a card issuer by 23 times by employing collaborative data.

The report also touches on the emerging threat of synthetic identities, which are used to create fake digital profiles for fraudulent purposes. It suggests that rigorous intelligence analysis could facilitate the identification of such profiles, which were found to be significantly more likely to exhibit distinct patterns, like lacking first-degree relatives and showing up in multiple credit applications in a short span.

Stephen Topliss emphasised the importance of addressing consumer trust in digital interactions, "The worst-case scenario is that consumers cease engaging digitally because they don't trust the process. Tackling this global issue requires a multi-layered approach, as there is no silver bullet anti-fraud solution."

The report underlines the role of human elements in the fraud ecosystem, such as money mules, who are often younger individuals under 25. These mules assist in laundering 2% to 5% of global GDP annually, highlighting the complex challenges faced in curbing fraud.