Take the example of an investment scam. A fraudster can now create a deepfake video of an authority figure endorsing a crypto or stock that promises fast profits, when in reality it is a phoney investment designed to steal money from unsuspecting victims.
Deepfake content is so well done that even trained eyes can miss signs.
Fraudsters are also leveraging text to create perfect scam scripts to catch out customers. With tools to create deepfake audio also accessible, fraudsters can directly impersonate loved ones of unsuspecting victims or an authority figure who convinces them to transfer money into an account they control.
The difficulty is that these tools can mimic accents and intonation, so they can be incredibly hard to detect in circumstances where the recipient is forced to make a split-second decision under emotional duress.
The impact of AI means that some of the traditional red flags for spotting scams no longer apply. Reverse image searching photos sent by a scammer, for example, is no longer always a viable option as entirely new and believable AI-generated images can be made in seconds that appear original.
Regulatory standpoint
The compounding effect is that customers are experiencing increased fraud losses globally. In the UK, £485mn was lost to APP fraud in 2022, the US recorded recent losses of $10bn, and Australia, a country of just 26mn people, recorded A$3bn in APP losses.
It is not necessarily a one size fits all case when it comes to consumer protection across jurisdictions.
We are seeing a dilemma where one solution to scam liability is right for one nation, but too hardline for another. However, what is clear is that action must be taken and the global trend appears to be moving liability away from the victim and towards the bank.
The UK is arguably leading the charge when it comes to forward-thinking reimbursement policies.
From October, we will see the most customer-friendly approach to reimbursement in action: UK banks and payment firms will be 100 per cent liable for scam losses, even when the payment is authorised by the customer.
It also seems likely that banks in the EU will follow a similar path, as a new directive – PSD3 (an update to PSD2) – will mandate banks to reimburse victims of certain types of scams.
To understand how we got to this point in the UK, we need to rewind to 2016. Consumer organisation Which? placed a super complaint on the Payment System Regulator, arguing that banks could do more to reduce consumer harm from authorised scams.
What followed was a revolutionary step by payment service providers and consumer groups with the launch of a contingent reimbursement model for APP scams.
