Key perception: Community banks could possibly profit from the big buildup of AI capability, as the price of AI-based fraud detection falls.
What’s at stake: Criminals’ use of AI-generated deepfakes to commit fraud has been rising quickly.
Expert quote: “What was as soon as the stuff of flicks is now a actuality,” mentioned Federal Reserve Gov. Michael Barr.
ST. LOUIS — Federal Reserve Gov. Michael Barr argued Wednesday that synthetic intelligence has the potential to assist community banks struggle fraud extra successfully, however he additionally issued a warning to the identical banks about the quickly increasing use of AI by cyber criminals.
Speaking on the Community Banking Research Conference, Barr mentioned that automated fraud detection seemingly hasn’t been cost-effective for some community banks prior to now.
“But the massive buildout in AI capability now underway, together with the explosion within the variety of corporations looking for to get into AI-based companies, might have the potential for driving down prices sufficient to make AI-based fraud detection extra possible for community banks,” he added.
Barr additionally flagged the rising threat to banks from criminals’ use of generative-AI deepfakes to commit fraud. “Using solely a quick pattern of audio and entry to info about people on the Internet, criminals make use of gen AI to impersonate an in depth relative in a disaster, or a high-value financial institution consumer looking for to finish a transaction at their financial institution,” he mentioned.
“What was as soon as the stuff of flicks is now a actuality, and loads is at stake,” Barr mentioned, noting that the usage of deepfakes in cybercrime is rising very quickly.
Barr additionally touched on the potential of AI to reshape employment throughout the U.S. financial system. Such an end result may assist banks in sure rural communities the place knowledge facilities get constructed, but it surely may damage lenders in locations the place there are concentrated job losses.
“I are typically an optimist about the potential for AI to make staff extra productive, elevate dwelling requirements and create extra jobs in new industries, however I’m lifelike in my expectation that it may trigger appreciable dislocation of staff and companies, a minimum of within the quick run,” Barr mentioned. “Communities depending on a small variety of employers or a single business that’s considerably affected by AI may expertise these dislocations.”
Barr, who was the Fed’s vice chair for supervision throughout a lot of the Biden administration, has spoken a number of occasions this 12 months about the potential impacts of AI on the monetary system.
In an April speech, he argued that banks and regulators needs to be taking steps to make profitable deepfake assaults much less probably, and likewise to make such assaults extra resource-intensive for the criminals.
“Another solution to disrupt the economics of cybercrime is by growing penalties for making an attempt to make use of gen AI to commit fraud and growing funding in cybercrime enforcement,” Barr mentioned within the April speech. “This consists of focusing on the upstream organizations that profit from unlawful motion and strengthening anti-money-laundering legal guidelines to disrupt illicit fund flows and freeze belongings associated to cybercrime.”
Barr’s newest remarks got here at a convention the place community bankers have been discussing the implications of AI for his or her establishments, which traditionally have usually been slower to undertake new applied sciences than their bigger friends.
On Tuesday, Alexander Price, the president and CEO of Ouray, Colorado-based First Citizens Bank, spoke about community banks’ must make sensible use of AI whereas additionally preserving their chief asset — the relationships they’ve with prospects.
“Community banks excel in disaster, whether or not that is a very large disaster just like the pandemic, or a … disaster like a loss of life, a divorce, fraud, identification theft,” Price mentioned. “Because that is the place you wish to are available and say, ‘Hey, I’ve this drawback.’ And it’s so distinctive to that person who no AI system may presumably say, ‘Here’s precisely what the answer is.'”
