Fraud in the Age of Artificial Intelligence: Innovation, Exploitation, and the Future of Financial Risk

In the rapidly digitizing global economy, fraud has emerged not merely as a persistent nuisance but as a transformative and persistently international risk. The convergence of digital payments, mobile banking, and artificial intelligence has enabled new efficiencies for consumers and businesses alike, but it has also created fertile ground for exploitation. In 2024, global losses reported by consumers due to fraud exceeded $12.5 billion, marking a 25 percent rise in this risk from the previous year. Yet this figure only scratches the surface. Beneath the aggregate losses lies a more complex reality: fraud is now a scalable enterprise, driven by technological innovation and psychological manipulation, and evolving faster than many institutions are equipped to handle.

At the heart of this evolution is a tension familiar to every technologist and policymaker: the dual-use nature of artificial intelligence. On one hand, AI-driven tools allow financial institutions to detect anomalies and flag suspicious transactions with unprecedented accuracy. On the other hand, the same technologies, from generative voice cloning to deepfake documentation, are being repurposed by sophisticated criminal networks to bypass traditional controls.

Jason Costain, a veteran fraud strategist and founder of Javloc, has spent over three decades at the frontline of this battle in financial risk. His career spans the analogue era of handwriting analysis to the deployment of AI-powered voice biometrics capable of scanning millions of calls in near real-time. The trajectory of his work mirrors the broader transformation of fraud itself, from low-level deception to a well-organized, data-driven industry that adapts with remarkable speed.

Nowhere is this shift more evident than in the proliferation of real-time payment infrastructures. In the UK, the Faster Payments Service has enabled customers to transfer large sums instantly, often from a smartphone, and often without meaningful friction. While such capabilities deliver undeniable convenience, they also expose consumers to significant risk. As Costain notes, people can now “lose their life savings from the comfort of their own home.” Few realize that many banking apps allow users to set daily payment limits, and even fewer take advantage of these built-in safeguards. In the absence of widespread education or default protections, vulnerability becomes systemic.

Artificial intelligence has been central to both attack and defense. Banks have increasingly adopted machine learning models that outperform legacy systems, reducing false positives while identifying fraud with greater speed and precision. However, the same computational capabilities are being harnessed by criminals. Voice cloning, forged biometric documents, and AI-generated synthetic identities are no longer rare or experimental, they are being actively deployed. While current limitations mean such techniques are primarily used in high-value, bespoke attacks, the direction of travel is clear. Accessibility is increasing, and with it, the scale of potential harm. There are so many risks, systems, and controls for CFOs to consider internationally.

Yet not all threats are cyber or technological. Many remain deeply human. Psychological manipulation continues to be one of the most effective tools in the fraudster’s arsenal. Whether through impersonating a bank official, triggering fear with claims of unauthorized activity, or exploiting desire through romance and investment scams, criminals know precisely how to target cognitive vulnerability. Research from the UK’s Financial Conduct Authority suggests that around half the population may be considered vulnerable at any given time. Moreover, individuals who believe themselves immune to scams are statistically more likely to fall victim, a cognitive bias that scammers exploit with ease.

Fraud isn’t just a cyber problem—it’s a failure of design, governance, and human insight. The real risk isn’t that criminals exploit our systems, but that we keep building systems they can exploit. Resilience starts when business leaders treat fraud as a strategic threat, not a technical glitch.

Dominic Bowen, Strategic Advisor and Host of The International Risk Podcast

This behavioral dimension makes fraud prevention particularly complex. Financial institutions are often structured in silos, with product teams optimizing for user experience while fraud teams are tasked with damage control. The result is a misalignment of priorities. In some banks, for instance, elderly customers are defaulted into daily payment limits as high as £100,000, a configuration that exposes them to extreme risk. While some institutions are beginning to course-correct, offering gamified fraud education or adaptive risk settings within mobile apps, these efforts are far from ubiquitous.

“Safety is the reason banks exist. People can now lose their life savings from the comfort of their own home. We need to stop treating fraud as a siloed problem and start embedding prevention into every layer of product design and governance.”

Jason Costain Financial Risk and Fraud Investigator

Cryptocurrencies have added another layer of complexity. Their perceived novelty, decentralization, and speculative potential have made them ideal vectors for fraud. During the height of the crypto boom, victims were lured through coordinated misinformation campaigns, fake exchanges, and social engineering posing as legitimate financial advisors. The rise of “pump-and-dump” schemes, often orchestrated across social platforms, demonstrates how manipulation has become both viral and transnational. While blockchain itself offers opportunities for transparency, the surrounding infrastructure remains fertile ground for abuse.

Looking ahead, the challenges facing financial institutions and regulators are considerable, but not insurmountable. There is a growing consensus among experts that static data authentication (e.g. mother’s maiden name, date of birth) is no longer fit for purpose. In its place, institutions must invest in multi-factor biometric systems that leverage device recognition, behavioral analysis, and voice or facial authentication. Equally, fraud prevention must be built into digital infrastructure from the outset, rather than retrofitted in response to loss.

Perhaps most critically, institutions must abandon the notion that fraud is the sole responsibility of the fraud department. As Costain underscores, “Safety is the reason banks exist.” That imperative must be shared across product design, risk governance, and customer education. Only by aligning strategic vision with operational practice can financial organizations build resilience against the next generation of fraud threats.

Ultimately, the story of fraud is not just one of technological arms races or criminal ingenuity. It is also a story about how we design systems, distribute responsibility, and respond to human fallibility. In an age defined by digital acceleration and deep uncertainty, those choices will define who remains secure, and who is left exposed.