Deepfakes and AI tools fuelling rise in US cyber fraud

Washington: The rapid rise of artificial intelligence (AI) and deepfake technology is driving a sharp increase in financial scams in the United States, lawmakers were told during a congressional hearing, as banks and credit unions warned that criminals are using advanced digital tools to impersonate victims and steal billions of dollars.

The issue was discussed during a hearing of the House Financial Services Subcommittee on Financial Institutions, where lawmakers examined the growing threat of fraud and online scams targeting American families, senior citizens and small businesses.

Cybercrime losses surge in the US

Subcommittee Chairman Andy Barr said the scale of financial fraud has expanded significantly as criminal networks adopt emerging technologies and operate across international borders.

“Fraud and scam losses are not abstract statistics,” Barr said during the hearing. “They represent retirement savings wiped out, college funds drained, and small business accounts emptied overnight.”

Citing FBI data, Barr said Americans reported $16.6 billion in cybercrime losses in 2024, marking a 33 per cent increase compared with the previous year.

Lawmakers said criminal groups are increasingly using AI tools, voice cloning, deepfake videos, spoofed caller IDs and fake investment platforms to deceive victims and gain access to funds.

Barr noted that banks and credit unions often become the last line of defence against these scams, even though many of them originate on digital platforms or outside the United States.

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Scammers using AI and deepfake technology

Ranking member Bill Foster said fraud and scam activity has continued to grow despite greater attention from regulators and law enforcement agencies.

“Scams are moving online, and the perpetrators are becoming more sophisticated,” Foster said. He added that criminals are now using artificial intelligence and deepfakes to forge documents, impersonate individuals and create convincing false identities to trick victims into sending money.

Banks and credit unions on the front line

Witnesses at the hearing told lawmakers that community banks and credit unions are increasingly confronting sophisticated fraud attempts while trying to safeguard customers and detect suspicious transactions.

Gaye Dempsey, chief executive of the Bank of Lincoln County in Tennessee, said smaller financial institutions are spending more resources on fraud prevention and scam detection, but cannot tackle the growing threat alone.

“Community banks like mine are on the front lines,” she said, pointing to cases involving cheque fraud, impersonation schemes and online romance scams.

Dempsey also described a case in which an elderly customer sold her home for $85,000 after being deceived by an online scammer. Although bank staff attempted to intervene, they were unable to stop the transfer.

“This was heartbreaking,” she told lawmakers.

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Digital platforms and social media are linked to scams

Patrick McDade, senior vice-president for fraud and technology risk management at EverBank, said banks spend billions of dollars and millions of staff hours each year combating financial fraud.

However, he noted that many scams begin on social media platforms, telecommunications networks and other online channels outside the banking system.

“The criminal is not deceiving the bank. They’re deceiving the customer,” McDade said, explaining that victims are often manipulated into authorising payments themselves.

Similarly, Kate McKune, general counsel at Park Community Credit Union, said credit unions are facing rising fraud risks while balancing consumer demand for faster digital payments and convenient financial services.

She noted that scams frequently originate through online advertisements, social media contacts, investment schemes or cryptocurrency offers.

“One of the biggest challenges in combating fraud is that it can take many different forms,” McKune said.

Call for stronger coordination and consumer awareness

Several witnesses urged the US Congress to strengthen coordination among federal agencies and allow greater information sharing between financial institutions to identify fraud patterns earlier.

Joseph Schuster, a partner at Ballard Spahr, said effective fraud detection relies on analysing patterns across banks and financial systems.

“Fraud identification is inherently pattern recognition,” he said, adding that legal uncertainty sometimes discourages institutions from sharing data that could expose criminal networks more quickly.

Experts also called for stronger consumer awareness campaigns and a national strategy to combat digital scams, particularly those involving AI-generated content, cryptocurrency payments and social media platforms.

IANS