Understanding the impact of deepfake technology on the financial system  

Over the last few years, advances in technologies, such as artificial intelligence, deep learning, and others, have a tremendous impact on businesses and societies as well. This progress in technologies, in some ways, makes it increasingly difficult to distinguish between real and synthetic media. And one of the most recent developments contributing to this problem is the introduction of deepfakes. A deepfake uses AI algorithms to replace and superimpose existing images and video clips to make fraudulent video and audio content that seem authentic.

Significantly, it can imitate a real person, making them appear to say words they have never even spoken. With deepfake technology, anyone with a computer and an Internet connection can create realistic-looking photos and videos of people saying and doing things that they did not actually say or do. In recent years, several deepfake videos have gone viral, from President Obama using an expletive to describe President Trump to Mark Zuckerberg admitting Facebook's true goal is to manipulate and exploit its users and many more.

The rate at which deepfake content online is growing is tremendous, tending to influence every aspect of people’s lives in the near future.

This technology is now creating a threat landscape in the financial systems as recently we have seen publicly documented cases of deepfakes used for fraud and extortion. Considering reports, a person impersonating France's defence minister, Jean-Yves Le Drian, scammed an estimated €80 million (US$90 million) from wealthy victims including the Aga Khan and the owner of Château Margaux wines. 

Most importantly, in less than a year, the number of deepfake videos online doubled, from 7,964 in December 2018 to over 14,000 just nine months later. To escape from the effects of deepfake technology, organizations need to be aware of as it is likely that fraudsters will weaponize this technology to commit cybercrime, adding yet another string to their bow.

What Does Deepfake Mean for Financial Services?

Typically, financial institutions or banks store a large amount of customer data. Any kind of breach of this information, or their assets, can have detrimental effects on all involved. Once data is breached, the consumer can potentially lose assets as malicious actors or cybercriminals can access their accounts and drain their funds. The emergence of deepfakes is making it more possible by imposing fraudulent activities like a criminal posing as someone else or creating a new, synthetic identity; by fraudulent payment authorizations and transfers; and by impersonating business leaders for insider trading scams or tricking employees into taking despicable actions.

According to a study, 77 percent of CSOs in the financial sector are concerned about the impact of deepfake video, audio, and images. While personal banking and payment transfers topped at risk of deepfake fraud, above social media, online dating, and online shopping, just 28 percent of businesses have put plans in place to safeguard against deepfakes, with 41 percent planning to do so in the next two years.

Although the deepfakes induced financial threat is comparatively low, it is likely that this threat will grow over time.