Experts Name the Most Challenging Fraud Threats from 2023 to Watch in 2024

Fraud attacks in 2023 reached unprecedented levels—levels so troubling that NASDAQ’s CEO labelled financial crime an epidemic that “exploits the most vulnerable members of our society and underpins many of the world’s most destructive crimes.”

That strong phrasing is more than warranted, as AI-powered fraud has ushered in a new era of financial crime that saw financial institutions (FIs) suffer a 65% increase in fraud losses in 2023.

Fraudsters are armed with more advanced technology than ever, with more organized schemes reaching farther around the globe than ever before too. Fraud fighters are no doubt up to the challenge, but the first step to winning the battle is taking key lessons from 2023’s most challenging threats to prepare 2024’s defenses.

In our recent DEFEND webinar “From 2023s Lessons to 2024s Strategies: Fraud Mitigation in the Age of AI and Real-Time Payments,” four fraud leaders with decades of experience in fraud prevention shared what they found the most difficult fraud trends to tackle in 2023 and what they advise organizations do to prepare to fight back in 2024.

| Watch the full webinar on demand now.

As your primer for the webinar, in this article, we’ll share the threats our panel labeled as the most challenging, plus why a modern fraud solution is the best defense against them in the future.

Most Challenging Fraud Threats of 2023

1. Generative AI-driven attacks

Much has been said about Generative AI this year. You’ve likely read about everything from its transformative uses in improving efficiency across industries to its (extremely exaggerated) potential to bring about the rise of the terminators.

But in looking at Generative AI’s real-world applications thus far, the one that perhaps should get the most attention, especially according to our panel of fraud experts, is its effect on both accelerating and preventing fraud. Fraudsters have unleashed chaos with Generative AI-driven attacks, leveraging the technology’s human-sounding language capabilities, deep learning, and current gap in regulation to make their schemes more destructive.

Generative AI-backed fraudsters have increased their phishing email efficacy, used deepfakes to bypass biometric security measures, and pioneered dangerous attacks like fake CEO scams that proved alarmingly successful. In fact, one deepfake CEO scam recently netted fraudsters a whopping $25 million.

Because fraudsters don’t have to play by the same rules as fraud fighters, DataVisor Chief Revenue Officer Kevin McWey explained in the recent DEFEND webinar, they can make their Generative AI attacks more destructive by harnessing its learning potential and continuous iteration for nefarious purposes. Fraud fighters, meanwhile, are beholden to following these privacy regulations, illustrating the clear need for better regulation overall around Generative AI usage.

2. Bot attacks

Classic frauds got a big tech upgrade in 2023, with Generative AI and other modern tools allowing fraudsters to launch mass-scale bot attacks targeting vulnerabilities in fraud frameworks.

Despite their traditional roots, these attacks remain as challenging as ever, capable of striking multiple points at a massive scale. When you consider that fraudsters rarely act alone and often have armies of bots at their crime network’s disposal, it’s clear why FIs need a modern fraud prevention solution that can use the same advanced technology to reveal and prevent these attacks before they happen.

3. Real-time payment scams

Mobile banking interfaces and real-time money transfer capabilities aren’t just luxuries anymore—they’re customer demands. FIs that don’t offer these know they will fall behind competitors, but they also know that opening transfers up to faster authorization can open the door to real-time payment scams.

This means FIs need to strike a delicate balance between convenience and security. This trend is one that our experts mention the industry has seen coming for a while, but now that it’s here some FIs are still catching up without having a modern fraud and risk solution in place.

4. First-party fraud

Another threat that’s been around for years but still poses as much danger for customers and FIs as ever is first-party fraud. While first-party fraud can increase in times of economic uncertainty as Kevin points out, first-party fraud is also getting a boost thanks to new technology. Chargeback fraud and buyer-seller collusion are harder to trace thanks to fraudsters putting layers between themselves and their crimes. This threat is also a crossroads point where Anti-Money Laundering (AML) can greatly help, highlighting the critical importance of collaboration between AML and fraud teams.

5. Account Takeovers (ATOs)

You won’t be surprised to see ATOs here if you read Datos Insights’ report on Trends in Fraud in the Digital Channel. The sharp rise in ATOs in 2023 follows a range of factors: increased mobile channel users, increased online channel users, general growth in digital fraud, and ease of access to stolen credentials.

Because phishing and social engineering scams got a tech boost with Generative AI, ATOs are a bigger threat than ever for good customers. Solutions like behavioral biometrics and more robust authentication measures can help, but FIs need to integrate them without increasing customer friction.

6. Synthetic activity and money mules

Reports from FIs of synthetic activity surged over the past year, shedding light not only on the rise of easy access to personally identifiable information (PII) but also on the increase in money mules associated with synthetic activity. Fraudsters increasingly rely on synthetic identities, particularly in credit card applications, presenting new challenges for fraud detection systems. With more PII available on black markets thanks to large-scale phishing scams and data breaches, fraudsters are in a golden age of synthetic activity.

Romance scams and cryptocurrency frauds have increased the number of money mules performing synthetic activity as well.

7. High-velocity check fraud

Despite making a notable widespread return in recent years, high-velocity check fraud continues to rise. Exploiting traditional check fraud techniques, fraudsters have become adept at tricking mobile banking and modern interfaces to evolve their check fraud schemes.

These scams have become more destructive and challenging to detect in the process. The accessibility of advanced tools has only empowered fraudsters to amplify the impact of these classic scams.

Addressing Challenges with a Modern Fraud Solution

To effectively combat these fraud threats, our experts say, one central defense is a must-have: a modern fraud solution. Relying on a robust data topology of the fraud landscape enhances analytics, providing critical insights into evolving attack patterns. The cornerstone of this type of modern solution should incorporate:

• A Data Orchestration Layer – A well-structured data orchestration layer is essential for organizing and managing vast amounts of data, enabling efficient analysis and identification of fraudulent activities.
• Quick Access and Assembly of the Right Tools – The ability to swiftly access and assemble the right tools is crucial for detecting specific fraud attacks. A dynamic toolkit ensures adaptability to evolving threats in real time.
• Quick Deployment of Prevention Strategies – Rapid deployment of prevention strategies is key to staying ahead of fraudsters. A proactive approach involves identifying attacks and implementing preventive measures faster than fraudsters can act.

Individual preventative action from a single FI won’t be enough to stem the rising tide of sophisticated fraud attacks, though. The entire industry needs to embrace modernization collectively. A united front against fraudsters involves everyone upgrading their fraud tech. As the saying goes, “A rising tide lifts all boats.” Modernizing the industry’s fraud prevention mechanisms benefits everyone and creates a more secure financial ecosystem.

Delve deeper into these fraud trends and gain key insights into prevention investment priorities by watching the DEFEND webinar “From 2023s Lessons to 2024s Strategies: Fraud Mitigation in the Age of AI and Real-Time Payments.”