Editor’s Note: BankBeat Editor at Large Jackie Hilgert compiled a summary of the events that shaped community banking this year for the December BankBeat magazine. This is the second in a five-part series chronicling her work. The first part was posted Dec. 2.
While artificial intelligence promises to create time-saving tools and processes for bankers, AI opens the door to increasingly sophisticated scams, aimed at bankers and their customers alike. A new concern in 2024: deep fake videos.
Researchers in Europe who studied AI-driven identity fraud found that deep fakes comprise 6.5 percent of total fraud attempts on financial institutions. This marks a staggering 2,137 percent increase during the past three years.
Deep fakes have come a long way since the term’s debut on Reddit in 2017. Recent breakthroughs in AI technology allow the fabrication of clearer, more convincing audio and video. Kris St. Martin of CBIZ told bankers at a seminar this fall that if anyone suspects a video is a deep fake, they should ask the speaker to speak while turning their head from side to side. The technology is not advanced enough to keep up with those two simultaneous movements, St. Martin said.
Cryptocurrency, often equated with bro culture and criminal activity, is having a moment in 2024. The crypto industry invested heavily in pro-crypto candidates during the recent national elections, bullish in the belief that if the right regulators (or no regulators) were in place, the future would be theirs. According to reporting by the New York Times, a super PAC called Fairshake and two related organizations, Protect Progress and Defend American Jobs, spent a total of about $135 million on this year’s elections, financed by donations from the crypto companies Coinbase and Ripple and the venture capital firm Andreessen Horowitz, which has backed more than 100 crypto startups.
That’s a tough sell when the FBI reported 69,000 financial fraud complaints involving the use of bitcoin, ether or tether last year. Though the number of cryptocurrency-related complaints was only 10 percent of the total number of financial fraud reports, the $5.6 billion in losses accounted for nearly half of total losses. The abuse of crypto was most prevalent in investment scams, according to the FBI, where losses accounted for nearly 71 percent of all crypto-related losses. Losses from investment fraud schemes involving deceptive practices to attract investment based on false information increased 53 percent last year to $3.96 billion from $2.57 billion in 2022.
In an October speech to bankers, however, Minneapolis Fed President Neel Kashkari said he could not see a use case for any digital currency — crypto or central bank digital — that existed outside of existing or legal banking channels. “The advocates speculate that maybe [digital currencies] would be better for financial inclusion or maybe it would reduce the cost of, for example, cross-border remittances. I haven’t seen any evidence that it does either of those things.”
And while on the topic of banking and crime, former Heartland Tri-State Bank CEO Shan Hanes, 53, was sentenced to more than 24 years in prison in August for embezzling $47.1 million from the Elkhart, Kan.-based bank in 2023. Hanes, who pleaded guilty to one count of embezzlement by a bank officer in May, said he fell victim to a crypto “pig butchering” scheme in which the impression was created that more transfers were needed to unfreeze previously deposited funds.
“Hanes made some very bad choices after being caught up in an extremely well-run cryptocurrency scam,” said his lawyer, John Stang. “He was the pig that was butchered.”
Also off to the clink this year was 71-year-old former Nebraska banker, Jack Poulsen, who was sentenced to 18 months in federal prison for an insider loan scheme that led to the 2020 collapse of Ericson State Bank.