AeroFund Blog

Is AI the New Fraud Frontier?

Written by Steve Troy | Mar 1, 2024 5:26:01 PM

 

We have been living in an age of technology for about 50 years now. You might consider different starts of the tech age: Intel’s development of the microchip in 1971, Apple’s introduction of the personal computer in 1976, or the IBM PC in 1981. From the microchip to the PC to the computer in your pocket, technology is everywhere and used by everyone. From the 2-year-old staring at an iPad to your grandmother face-timing on their iPhone, technology has changed our lives. 

 

Do you know who else uses technology? Crooks, bad guys looking to steal your money. The question is: Are fraud and scams more sophisticated and/or frequent today than 50 years ago? According to the FBI, they are more frequent. Scammers and fraudsters can reach many more people today than they could decades ago. Pre-technology, a scam was typically done either face-to-face or over US mail. Mail fraud was so prevalent then that there is now a fraud statute and a fraud department at the US Postal Service. 

 

No one is going through your trash looking for your social security number and date of birth. You have already provided that information to multiple companies you did business with. Scammers can pay a few hundred dollars and get a listing of thousands of names along with addresses, birthdays, social security numbers, and even your passwords. They can have more of your information at their fingertips than you can remember yourself. 

 

If fraud is more prevalent, surely it has to be more sophisticated, right? Well, not exactly. Doing a forensic dive into fraud today, it does not seem to be any different compared to 50, 60, or even 100 years ago. One of the most popular forms of fraud people fall for is the Ponzi scheme, which was named after Charles Ponzi in the 1920’s. Ponzi was not the first to use this scam of promising high returns to investors and using their money to pay the high interest payments of old investors, all the while siphoning off money to live a lavish lifestyle. Bernie Madoff brought the Ponzi scheme to an elevated art. 

The Ponzi scheme is not the only classic fraud to be used today to separate honest people from their money. There is still the old-fashioned pigeon drop that was featured in the beginning of the movie The Sting, where the fraudster finds a lot of money or winning lottery ticket and tells an unsuspecting mark if they give them earnest money they will allow them to hold the ticket or found money and they can split the booty. Obviously the cash has been switched or the ticket is a counterfeit.

 

Then there are the Nigerian letter scams. “I am a prince who cannot get my money out of the country. I need your help, honest person. I can send the money to you and you can keep 10% for helping me. To show your honesty, please send me a good faith payment so I know you are honest.” Boom, your money is gone.

 

Fake girlfriends needing travel money to leave a war-torn country, non-existent stock investments, or your grandson was robbed and needs money to get home. The fraud goes on and on, and people fall for it time and time again. Collusion has always been a favorite of the criminal set; 2 or more parties conspiring to remove you from your money. These parties pretend to not be related, but in fact they are working in consort to make it look like there is a legitimate business relationship to lure you in to a false transaction.

 

Banking fraud is certainly on the rise. Malicious actors can create fake companies that trade with other fake companies to create fake collateral to bilk banks and finance companies out of millions. How else do you rob a bank in the internet age? The same way as they did 50 years ago. An employee uses their password to enter the computer and transfer money to an offshore account. Ah, you are not an insider and do not have the password? No problem, just trick someone at the organization into giving you their password. How? You trick them into opening an app on an email that places a piece of spyware on their PC where they can watch you enter it. 

 

Want to rob a corporation? You don’t need to threaten them with blowing up their store, offering protection, or hijacking their trucks. Take control of their computer server and demand ransom to unlock it. 

You might think to yourself “I would never fall for scams that are so transparent!”. Some sophisticated investors have been scammed with one or more of these. After someone who has been defrauded starts to explain what happened to the police, it becomes apparent how simple these frauds really were. Fraud depends on nothing more than playing on the honesty, heartstrings, gullibility, and yes, the greed of someone like you or me. 

 

Doing a deep dive on fraud, it is hard to see anything new other than the sheer volume of attacks. Instead of sending 10 letters by US mail, it is now thousands of emails to unsuspecting victims. Instead of looking over someone’s shoulder for a password, it is a spybot placed on a PC. Forget the whiteout and scissors to create a fake document; photoshop can create convincing letterheads, signatures, checks, and money orders. 

 

Will artificial intelligence create new frauds and scams? Doubtful. Will it make the same old frauds be more convincing? Probably. Can we all protect ourselves from ever falling victim to fraud? Absolutely not. At some point in time, we will all fall victim to a fraudster. Why? Because we are honest, and we want to believe in the goodness of people. Pierre Omidyar, the founder of eBay, said it best when asked why he expected someone would send payment after goods were already shipped. He said, “given the opportunity, most people will do the right thing”. The key words here are “most people”. Unfortunately, that remaining minority will try and prey upon the rest of us, keeping us all on guard.

 

If you are looking for an honest deal, take a minute and give AeroFund Financial a call.