“People are just not afraid of being cheated”

When Clark Hoefnagels’ grandmother was conned out of $27,000 (£21,000) last year, he felt compelled to do something about it.

“I felt like my family was vulnerable and I needed to do something to protect them,” he says.

“There was a sense of responsibility to deal with all things related to technology for my family.”

As part of his efforts, Mr. Hoefnagels, who lives in Ontario, Canada, ran fraudulent or “phishing” emails his grandmother received through the popular artificial intelligence chatbot ChatGPT.

He was curious to see if he would recognize them as fraudulent, and he immediately did.

From that seed was born an idea that has since grown into a business called Catch. It is an artificial intelligence system that has been trained to recognize fraudulent emails.

Currently, Catch is compatible with Google’s Gmail, scanning incoming emails and flagging any that are, or potentially are, fraudulent.

AI tools like ChatGPT, Google Gemini, Claude and Microsoft Copilot are also known as generative AI. They can generate new content.

At first it was a text response to a question, request, or you started a conversation with them. However, generative AI applications can now increasingly create photos and paintings, voice content, compose music or create documents.

People from all walks of life and industries are increasingly using such AI to improve their work. Unfortunately, scammers too.

In fact, there is a product sold on the dark web called FraudGPT that allows criminals to create content to facilitate a range of scams, including creating bank-related phishing emails or creating custom fraudulent websites designed to steal personal information.

More troubling is the use of voice cloning, which can be used to convince a relative that their loved one needs financial help, or even in some cases to believe that the individual has been kidnapped and needs to pay a ransom.

There are some pretty alarming statistics about the scale of the growing AI fraud problem.

Reports of artificial intelligence tools being used to try to trick bank systems will increase by 84% in 2022, according to the latest figures from anti-fraud organization Cifas.

The situation is similar in the US, where a report this month said artificial intelligence “has led to a significant increase in the sophistication of cybercrime”.

Given this heightened global threat, you’d imagine that Mr. Hoefnagel’s Catch product would be popular with the public. Unfortunately, that was not the case.

“People don’t want it,” he says. “We learned that people are not afraid of scams, even if they have been scammed.

“We talked to a guy who lost $15,000 and told him we’d capture the email and he wasn’t interested. People are not interested in any level of protection.”

Mr. Hoefnagels adds that this particular man just didn’t think it would happen to him again.

According to him, the group that is afraid of fraud is the elderly. But rather than buying protection, she says, their fears are more often quelled with a very low-tech tactic — their kids simply tell them not to answer or respond.

Mr Hoefnagels says he fully understands this approach. “After what happened to my grandmother, we basically said ‘don’t pick up the phone if you don’t have it in your contacts and don’t send emails anymore’.”

As a result of the apathy Catch has faced, Mr. Hoefnagel says he is now liquidating the store while looking for a potential buyer.

While individuals may be scam-happy and fraudsters are increasingly using AI, banks can’t afford to.

According to a global survey in January, two-thirds of financial firms now see AI fraud as a “growing threat”.

Fortunately, banks are now increasingly using AI to fight back.

Artificial intelligence software from Norwegian start-up Strise is helping European banks detect fraudulent transactions and money laundering from 2022. It automatically and quickly goes through millions of transactions a day.

“There are a lot of pieces of the puzzle that you have to put together, and the AI ​​software makes it possible to automate the checks,” says Strise co-founder Marit Rødevand.

“It’s a very complicated business and compliance teams have been hiring drastically in recent years, but AI can help bring that information together very quickly.”

Ms. Rødevand adds that it is primarily about being one step ahead of criminals. “A criminal doesn’t have to worry about legislation or compliance. And they’re also good at sharing data, whereas banks can’t because of regulation, so criminals can use new technologies more quickly.”

Featuresspace, another tech firm that makes artificial intelligence software to help banks fight fraud, says it’s noticing things that are out of the ordinary.

“We don’t track the behavior of the fraudster, instead we track the behavior of the real customer,” says Martina King, CEO of the Anglo-American company.

“We create a statistical profile based on what a good normal looks like. Based on the data available to the bank, we can see if something is behaving normally or anomalistically and out of line.”

The firm claims it now works with banks such as HSBC, NatWest and TSB and has contracts in 27 different countries.

In Ontario, Mr. Hoefnagels says that while he was initially frustrated that more and more members of the public didn’t understand the growing risk of fraud, he now understands that people just don’t think it’s going to happen to them.

“It led me to have more compassion for individuals and [instead] try to put more pressure on companies and governments.”