Is the FCA underestimating the AI fraud threat?

There is a lot of optimism around what AI could do for financial services.

It can make processes faster, spot suspicious activity earlier and help banks deal with fraud at a scale that would be impossible for human teams alone.

All of that is true.

But it risks obscuring a more immediate problem.

The same technology is improving the economics of fraud, and criminals do not have the same constraints as the organizations trying to stop them.

They do not have lengthy procurement cycles, legacy technology to integrate or regulatory processes to work through.

They can experiment, fail and try again.

That creates a growing gap between the speed at which AI-enabled fraud is developing and the speed at which financial institutions can adapt their defenses.

The question for the FCA, and for the industry more broadly, is whether we are paying enough attention to that gap.

Identity checks were built for a different problem Many of the identity verification controls used today were designed around a fairly simple assumption: somewhere in the process, a human being is pretending to be somebody else.

That is why firms have become comfortable with measures such as video liveness checks, voice callbacks and one-off document verification.

Each creates another hurdle for the fraudster.

Generative AI changes the nature of that challenge because the person, voice or document being presented may never have existed in the first place.

A convincing voice can be generated.