Artificial Intelligence And The Scam Industry

Who will be the big loser? The public or financial institutions?


As the internet weaves its tentacles more and more into the lives and homes of people around the world and artificial intelligence (AI) becomes more mainstream, does this put more and more people at risk at the hands of the international scamming organizations?

In the past few weeks, a number of scams have been reported involving both small and large sums of money.


In one, a Canadian retiree purchased a California condo. He had his bank wire a deposit to the sellers California bank account and waited for instructions on paying the outstanding balance of $820,000 Cdn. An email supposedly from the realtor handling the sale advised the balance should be wired to a different bank than the one the seller paid the deposit to. However, this email was a scam. The realtor's email account had been hacked and the $820,000 was wired to the scammers who immediately rewired the funds to the Bank of China in HongKong. An interesting destination given the Chinese government's blind eye to crooked schemes that do not threaten the totalitarian reign of Xi Ji Ping.


The above scam is an example of what investigators call business email compromise, a type of wire fraud that targets businesses and their customers by hacking into a business account, impersonating the sender and providing different banking details, usually to a foreign country.


Recently, there have been a number of cases where bank customers have had funds stolen from their bank accounts through fraudulent Interac transfers. This happened to me and though the bank did cover my loss, somewhat reluctantly, they provided me with no explanation as to how it happened. Please see this story Interac Scams.


There was a similar case where a homeowner paid a $13,500 bill online through his ISP. He didn't know his account had been hacked and did not find out until well after the fact that a scammer had redirected the payment to another account. Of course, the money was gone and the bank refused to reimburse him, denying responsibility for his loss claiming the bank had no control over the customer's email account.

One just has to Google bank scams, Interac scams, wire transfer scams or bank fraud to view thousands of websites and stories reported by victims totaling global losses of over US$12 billion between 2013 and 2018.


The big concern among banks and financial institutions must be the use of artificial intelligence by the criminal industry. The banking industry claim AI will work in favor of the banks in detecting fraud. However, since the inception of the internet, the financial industry has been playing catch up with the crooks. Will it be any different with the greater use of AI? I doubt it. There are some critics of the banking industry who claim the number of $12 billion dollars is vastly understated with the banks unwilling to disclose how much they actually do lose to fraud.


The cornerstone of some country's gross domestic product is scamming western countries. North Korea's hacking experts are trained in China and it is estimated the North Korean government generates anywhere from $2 billion to $5 billion a year from online scams and counterfeiting other countries' currency. The following countries have been listed on the "the countries most prolific in scamming". Some of them are surprising; Switzerland, Canada, the United Kingdom, Netherlands, and France. The rest are not surprising at all.


Nigeria, Mexico, Ukraine, Hungary, Malaysia, Colombia, Romania

Philippines, Greece, Brazil, China, Indonesia, Russia, Singapore, Nigeria, Canada, Portugal, Switzerland, United Kingdom, India, Netherlands, France, and Austria.

Given the ease of setting up a virtual private network (VPN) and the lax website hosting laws of many countries, it is very simple to create a scam site from anywhere in the world. In countries such as India and China where there is so much abject poverty, it is not surprising the country is a seething hotbed of scammers. Recently the government in India closed down a scam business, arresting 37 employees who were phoning Canadians and impersonating the Canadian Revenue Agency, the RCMP (Royal Canadian Mounted Police), banks and internet companies and extorting millions of dollars from gullible victims.


When it comes to eCommerce fraud, nations like Latvia, Egypt and the United States top the list. There are many instances of online fraud such as hacking, phishing, and leaking of sensitive financial data. Because of this, both businesses and customers lose millions of dollars annually. The prevalence of credit card transactions around the world has made it easier to perpetrate credit card fraud even while the governments of many countries are trying to prevent internet crime.

Image Credit: Markus Siske, Unsplash

How will AI fit into this global scamming industry? Social engineering is used in many online scams. A growing number of scamming organizations are using it in place of the old fashioned hacking strategies. Social engineering scams are becoming even more insidious as hackers have discovered that artificial intelligence can make online fraud and international scamming more attractive. International hackers and scammers are now using a variety of machine learning and predictive analytics models to target new marks and reach them more effectively.


How will the western world governments and financial institutions react? The jury is still out as banks have shown to date, a propensity for hiring cheap labor to defend their client accounts and governments simply do not have the sophistication or the resources to do not have the sophistication or the resources to counter the growing internet attacks.


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