Artificial intelligence (AI) is revolutionizing the wealth management industry in Canada. While it offers great potential for enhancing investment portfolios and improving profitability, it also brings about significant concerns for firms’ information technology (IT) teams. The rapid growth of AI is creating anxieties among wealth management firms, who fear that fraudsters are exploiting this technology to deceive not only clients, but advisors as well.
The need for greater awareness and vigilance among advisors, wealth management firms’ leadership, and clients has become crucial in combating increasingly sophisticated frauds. Generative AI tools, readily available and easily accessible, are being used to conduct deceptive attacks with higher effectiveness, magnitude, and reach. This has raised alarms among industry professionals, as they struggle to defend against these fraudulent activities.
Canadian organizations have already experienced the detrimental impact of fraud. A recent survey conducted by KPMG revealed that 95 percent of leaders are highly concerned about the rise of deep fakes and the increased risk of fraud within their companies. Furthermore, the financial services industry witnessed a staggering 76 percent year-over-year increase in digital fraud in 2023, compared to a 3 percent global rise.
According to the Canadian Anti-Fraud Centre, Canadians lost approximately $554 million to fraud in 2023, surpassing the previous year’s losses. This surge in fraudulent activities is attributed to the combination of traditional phishing attacks with the enhanced capabilities of generative AI. Criminals are now able to create targeted attacks with minimal effort, posing a significant threat to wealth management firms and their clients.
One of the major concerns lies in the replication of voices through generative AI. Fraudsters can now produce convincing “deepfake” videos or clone someone’s voice to trick advisors or clients into believing they are interacting with a known and trusted individual. This poses a serious challenge to wealth management firms who rely on trust to maintain client relationships. While these technologies have yet to be widely utilized in the industry, advisors are becoming increasingly aware of the potential risks they pose.
To combat these threats, wealth management firms are implementing various measures. Question-and-answer protocols that involve information known only to advisors and clients are being used to verify identities and transactions. When prompted by a transaction request, advisors often contact the client using a pre-registered phone number to ensure the legitimacy of the request. These protocols help mitigate the risks associated with fraudulent activities.
Industry professionals emphasize the importance of continually enhancing security measures to stay ahead of attackers. While AI technology aids in detecting and preventing fraud attempts, it is crucial to maintain a proactive approach in countering evolving tactics. The wealth management industry heavily relies on trust, and the use of AI tools by criminals blurs the line between real and fake. The relationship between advisors and clients becomes even more critical in this new era of fraud, as it serves as a foundation for verifying the authenticity of interactions.
The rise of generative AI has introduced a new level of efficiency for attackers. They can exploit publicly available information on social media platforms like LinkedIn to conduct spear-phishing attacks. Industry professionals are cautious about revealing personal information in public view to reduce the risk of such attacks.
In conclusion, AI’s rapid growth in the wealth management industry has opened up new doors for both profit and fraud. While AI tools are invaluable in detecting and preventing fraudulent activities, wealth management firms must remain vigilant and adapt their security measures to combat the evolving threat landscape. Strengthening the relationship between advisors and clients, implementing robust verification protocols, and raising awareness among industry professionals and clients are key steps in safeguarding against the risks posed by AI-driven fraud.
FAQ
What is generative AI?
Generative AI is a form of artificial intelligence that utilizes machine learning algorithms to create new and original content, such as images, videos, or text.
What are deepfakes?
Deepfakes refer to manipulated audio or video recordings that use generative AI to create convincing and realistic simulations of people, often targeting individuals for malicious purposes.
How can wealth management firms combat AI-driven fraud?
Wealth management firms can combat AI-driven fraud by implementing robust security measures, such as question-and-answer protocols, verification procedures, and raising awareness among advisors and clients about potential risks and red flags.
What is spear-phishing?
Spear-phishing is a targeted form of phishing attack that aims to deceive specific individuals or organizations by posing as a familiar contact or trusted entity to trick them into divulging sensitive information or performing certain actions.
Source: The Globe and Mail (www.theglobeandmail.com)
What is generative AI?
Generative AI is a form of artificial intelligence that utilizes machine learning algorithms to create new and original content, such as images, videos, or text.
What are deepfakes?
Deepfakes refer to manipulated audio or video recordings that use generative AI to create convincing and realistic simulations of people, often targeting individuals for malicious purposes.
How can wealth management firms combat AI-driven fraud?
Wealth management firms can combat AI-driven fraud by implementing robust security measures, such as question-and-answer protocols, verification procedures, and raising awareness among advisors and clients about potential risks and red flags.
What is spear-phishing?
Spear-phishing is a targeted form of phishing attack that aims to deceive specific individuals or organizations by posing as a familiar contact or trusted entity to trick them into divulging sensitive information or performing certain actions.
Source: The Globe and Mail (www.theglobeandmail.com)