Future fraud innovation: Opportunity arriving every second

As digital transformation evolves, so does fraud

Digital transformation moves quickly, but fraudsters move even faster. And the sophistication is only growing. By next year, identity verification, financial transactions, and business operations will be smoother than ever. Imagine boarding a plane without requiring a physical passport — retina scans, digital IDs, and biometric authentication will handle verification in the background.

But with every leap forward in convenience, fraudsters find new ways to exploit emerging technologies. What if contact lenses could mimic someone else’s retinas? What if digital ID implants could be copied and used for impersonation? These scenarios may seem far-fetched. But identity fraud, deepfake deception, and synthetic identity schemes are already happening today, and they’re only going to get more advanced.

According to Equifax, in the second quarter of 2024, 48.3 percent of all flagged fraudulent credit applications were linked to identity fraud, up from 42.9 percent the previous year. Synthetic identity fraud alone tripled in a year. Meanwhile, Statista found that Canadians lost $123 million to fraud in just the first quarter of 2024, with total losses in 2023 reaching $554 million.

And it’s not just individuals who are at risk: A Payments Canada study reported that one in five Canadian businesses experienced payment fraud in the past six months, with large enterprises (26 percent) hit harder than small businesses (16 percent). The most common fraud types were impersonation scams (25 percent), intercepted e-transfers (22 percent), and credit card fraud (20 percent).

Fraud is evolving faster than most defenses. To stay ahead, your business must embrace AI-powered detection, continuous fraud monitoring, and robust security controls — because fraudsters are already doing the same.

The rise of AI-driven fraud

Fraud is no longer about stealing credit card numbers. It’s about manipulating trust. AI and deepfake technology have ushered in a new era where criminals can:

• Clone voices and appearances to impersonate executives and approve fraudulent transactions
• Use AI-generated phishing emails and fake invoices to deceive employees
• Use synthetic identities — fake personas built from real and stolen data — to open accounts, take out loans, and commit large-scale fraud
• Create fake online stores, investment platforms, and charity scams to steal money and personal data

Risks to watch

Phishing and social engineering: Increasingly sophisticated phishing emails, text messages, and social engineering trick employees and consumers into revealing sensitive data or making unauthorized transactions.

Business email compromise: Fraudsters impersonate executives or vendors to approve fraudulent payments.

Cyber fraud and ransomware: Criminals encrypt data and demand ransom, often targeting small and medium-sized businesses with fewer resources for cyber security.

Identity theft and synthetic identities: Fraudsters combine real and fake information to create synthetic identities, which are used to commit financial fraud, open fraudulent accounts, or access government benefits.

E-commerce and payment scams: Card-not-present fraud, fake online stores, and chargeback scams continue to rise.

Investment scams: Fake high-return investment opportunities, like cryptocurrencies, real estate, and high-yield schemes, mislead victims, especially when the economy is volatile.

Insider fraud: Employees or contractors exploit their access to internal systems or sensitive data for personal gain, often unnoticed until significant losses occur.

Tax and benefit fraud: Fraud related to tax filings and government benefits, like employment insurance and pandemic-related relief programs, remains a concern.

Charity and donation scams: Scammers pretend to be legitimate charities or create fake ones to exploit public generosity, especially during disasters or crises. 

Counterfeit goods and intellectual property theft: The distribution of counterfeit products and the unauthorized use of trademarks or copyrights harms businesses and misleads consumers.