Investing.com -- Federal Reserve Governor Michael S. Barr has warned that the rise of deepfake technology is intensifying cybersecurity challenges across the financial sector. Speaking at the Federal Reserve Bank of New York, Barr said the use of AI-generated audio and video to impersonate individuals is elevating the risk of identity fraud.
Barr noted that deepfake-related fraud has grown twentyfold over the past three years, making it a serious concern for financial institutions. He added that generative AI is contributing to an arms race between cybercriminals and banks, with attackers quickly adopting new tools to exploit vulnerabilities.
Using voice and video synthesis, fraudsters can impersonate family members, high-net-worth individuals, or corporate executives, Barr said. He also pointed to the use of AI to collect and organize personal data to bypass existing identity verification protocols.
Barr cited high-profile cases, including a 2024 incident where criminals used a deepfake of a CFO at Arup to steal $25 million. In a separate case, a deepfake impersonation of Ferrari’s CEO was used in an attempted fraud that was ultimately thwarted.
To counter such threats, Barr said banks need to modernize identity verification systems by incorporating AI-enabled technologies such as facial recognition, voice authentication, and behavioral biometrics. He also encouraged enhanced transaction monitoring using analytics to flag suspicious activity patterns.
Barr emphasized that consumers play an essential role in cybersecurity by adopting multi-factor authentication and independently verifying unusual financial requests. He also underscored the importance of regulatory updates to account for emerging threats, including greater use of AI to detect and mitigate fraud across the system.
He called for stronger international cooperation, improvements in real-time threat intelligence sharing, and tougher enforcement. Barr said raising penalties for AI-enabled fraud and investing in cybercrime enforcement would help deter malicious actors.
Deepfakes, Barr concluded, are just one example of how technology is changing the risk landscape for banks—and why the industry must innovate, coordinate, and adapt to keep pace.
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