transparency, reporting on AI performance and fraud detection effectiveness are all steps that a bank may consider taking to ensure it maintains oversight of these third parties. The risks highlighted by Gov. Barr certainly aren’t new to the regulatory landscape. In November 2024, FinCEN issued an alert (FIN-2024-ALERT004) that serves to help financial institutions identify fraud schemes associated with the use of deepfake media and generative AI in fraud. The alert is part of the U.S. Department of the Treasury’s initiative to address the challenges posed by AI in the financial sector. It offers foundational awareness of the threat of deepfakes. Additionally, the alert serves as guidance for banks to review and update their risk-based procedures to address the specific challenges posed by deepfakes. The alert also provides specific red flags to help institutions identify potential deepfakes, including but not limited to anomalies in submitted images or videos, discrepancies between known customer data and new applications and unusual transaction behavior following new account openings. Further provided is SAR filing guidance, directing institutions to use the key term “FIN-2024-DEEPFAKEFRAUD” when reporting suspected activity. Banks should incorporate these indicators into their fraud programs and consider whether their current systems are sufficient to capture synthetic identity activity in a timely manner. As banks increasingly rely on AI to combat fraud, it is crucial to also recognize and manage the new risks associated with Gen AI. A robust strategy involves more than just implementing protective technologies; it requires a shift in culture and operations to effectively handle the rising sophistication of synthetic identities, the potential misuse of deepfakes to circumvent security measures and the vulnerabilities that may arise from third-party vendors utilizing AI tools. Establishing strong AI governance, designing scalable controls and ensuring proper oversight of third-party partners are essential steps in mitigating these threats. Although the danger posed by deepfakes is significant and escalating, with careful planning and adaptation, even smaller community banks can substantially lower their risk and bolster their resilience in this evolving AI-driven landscape. 28 NEBRASKA BANKER
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