By Loran March, Senior Fraud Analyst and Sami Davis, Fraud Analyst
As technology advances, bad actors are becoming more sophisticated and fraud 
tactics are rapidly evolving. Read what Alloya’s fraud experts have to say about two trending fraud tactics and how to beat fraudsters at their own game through increased vigilance and innovation.
Artificial Intelligence and Machine Learning
The increased use of Artificial Intelligence (AI) and Machine Learning (ML) is a significant trend this year in both perpetrating and combating fraud. AI and ML algorithms can analyze vast amounts of data at unprecedented speeds, making them powerful tools for detecting fraud. However, fraudsters are also leveraging these technologies to create more sophisticated schemes.
AI in Fraud Perpetration
Deepfake technology, which uses AI to create realistic audio and video forgeries, is a new tactic in social engineering attacks, such as phishing and business email compromises, as well as synthetic identity theft, making it harder to distinguish between genuine and fraudulent communications and individuals. These deepfakes can be used to impersonate executives or trusted individuals, convincing employees to transfer funds or reveal confidential information.
AI in Fraud Detection
AI-driven detection systems are proving to be a positive investment for financial institutions. These systems continuously learn from new data, improving their ability to identify fraudulent activities, enable real-time monitoring of transactions, and reduce the time to detect and respond to fraud. Furthermore, AI can help identify subtle patterns indicating fraud that human analysts might miss. For example, Mastercard recently implemented the use of generative AI and doubled the speed at which they detected compromised cards, reduced false positives and became aware of more complex fraud patterns. [1]
Educating your members on common phishing attack indicators and cautioning them to be wary of what they share online can reduce their chances of becoming a victim. Your credit union will need to monitor for inconsistencies in member information, such as mismatched addresses or unusual account activity, to help identify potential synthetic identities.
Expansion of Cyber Fraud
As technology continues to evolve, cyber fraud is growing in complexity and frequency. The increasing reliance on digital platforms for financial transactions, communication and data storage creates new vulnerabilities for cybercriminals to exploit your members.
Ransomware Attacks
Ransomware attacks, where malicious software encrypts a victim’s data until a ransom is paid, have become more prevalent and targeted. In the near future, these attacks will likely focus on critical infrastructure, healthcare systems and large corporations, where the impact and potential payout are substantial. Attackers are expected to use advanced encryption techniques, making it nearly impossible for victims to recover their data without paying the ransom.[2]
The continued rise of Ransomware-as-a-Service (RaaS) platforms, where cybercriminals sell or lease ransomware tools to others, contributes to the increase in ransomware attacks, as this business model lowers the barrier to entry for aspiring cybercriminals. Your credit union should invest in robust cybersecurity measures, including regular data backups, employee training and incident response plans to mitigate the risk and impact of ransomware attacks.[3]
Credential Stuffing
Credential stuffing, a cyber-attack where stolen usernames and passwords are used to gain unauthorized access to accounts, is expected to rise.[4] With the increasing number of data breaches, fraudsters have access to vast repositories of credentials, which they can use to breach accounts across multiple platforms due to the common practice of reusing passwords.
To protect against these attacks, your credit union can implement multi-factor authentication (MFA) and other security measures. Automated tools that monitor for unusual login attempts and behavior analytics can also help detect and prevent these attacks. In addition, credit unions should educate members about the importance of using strong, unique passwords for each account.
Conclusion
Alloya understands that with the rapid advancement of technology, fraud prevention is a significant challenge for credit unions. We are actively reviewing solutions such as leveraging AI and machine learning and enhancing cybersecurity practices to effectively navigate the complex fraud landscape of the twenty-first century. Alloya is committed to staying one step ahead of fraudsters and doing everything in our power to keep our members safe.
For more information, please contact solutions@alloyacorp.org
