Rising fraud fear: 74% of Americans believe AI will fuel scams

By Gloria Methri

Fraudulent activities have become a growing concern for American consumers, with the Federal Trade Commission (FTC) reporting a staggering $10 billion lost to scams in 2023—up from $3.5 billion in 2020. The cost to North American financial institutions has also surged, reaching $4.41 for every dollar lost to a fraudster. These figures highlight the urgent need for increased vigilance and advanced tools to combat financial crime.

Could AI escalate financial crime?

A recent survey conducted by Abrigo found that 90% of Americans are alarmed by the rise in fraudulent activities. A significant majority (68%) are worried that financial fraud attempts and their success rate will increase with the advancement of artificial intelligence (AI).

Ravi Nemalikanti, Abrigo’s CTO, stated, “Americans are expressing deep concern about rising fraud and the fear that AI advancements will add to rising scam rates. Financial crime is always evolving, and that means we will need vigilant, ethical, AI-assisted crime fighters to stop criminals using AI.”

Jay Blandford, CEO at Abrigo, added, “Both consumers and financial institutions must guard against new, sophisticated AI-backed methods of attack. Criminals are already utilizing AI for fraud schemes, so financial institutions must be able to leverage the same tools within their anti-fraud solutions to stay on top of crime. Abrigo continues to focus on driving efficiency in fraud detection with AI, including machine learning.”

Americans fall victim to fraud

Nearly half of those surveyed (45%) reported being victims of financial fraud, with the top three types of scams being credit card theft (53%), ACH or electronic payment fraud (19%), and check fraud (17%). Nearly a quarter (24%) of respondents indicated they had lost $5,000 or more to scams.

Americans surveyed were most concerned about internet scams and identity theft, often originating from check fraud. Respondents also expressed concern about major financial crimes such as money laundering. This is particularly relevant as cryptocurrency gains prominence and money launderers increasingly turn to crypto. In response, federal financial regulators are updating anti-money laundering (AML) requirements for financial institutions and encouraging innovative compliance approaches.

Blandford emphasized, “As AI amplifies attacks, it’s more important than ever for FinCrime professionals at banks, credit unions, and other financial institutions to understand the specific methods, patterns, and techniques criminals use in money laundering and be prepared to detect this activity in transactions with tools and approaches that can keep up.”

Financial Institutions most affected

According to the survey, over a third of Americans (36%) believe that 75% of fraudulent transactions can be recovered, but the reality is far from this optimistic view. The 2023 Association for Financial Professionals (AFP) payments fraud survey found that the majority of organizations recoup less than 10% of the funds stolen.

Additionally, while more than half of Americans (53%) believe credit card theft is the most common form of fraud, check fraud poses a greater liability for banks. Beyond the direct financial losses, financial institutions also risk losing business after their customers experience fraud: 16% of respondents switched financial institutions entirely after becoming fraud victims.

Moreover, most Americans (58%) indicated they would be more likely to minimize their banking relationship with a financial institution (i.e., reduce the use of a card, reduce the number of accounts, etc.) if they were victims.