Fed's Barr urges banks to adopt AI to combat rising deepfake risks

Federal Reserve Governor Michael Barr on Thursday urged banks to adopt AI-powered tools, such as facial recognition, voice analysis and behavioral biometrics, to enhance customer identity verification and counter growing deepfake risks.

A deepfake is a fake piece of digital content created with AI to ultimately replicate a real person's identity.

Such technology "has the potential to supercharge identity fraud," Barr warned in remarks prepared for delivery at the Federal Reserve Bank of New York.

His solution: "we should take steps to lessen the impact of attacks by making successful breaches less likely, while making each attack more resource-intensive for the attacker."

The Fed's former top banking cop noted that lenders already have dual oversight of transactions, verifying both the sender's identity and the recipient's address. In addition to "employing advanced analytics to flag suspicious patterns that could indicate fraudulent activities," banks are already "engaging with other financial institutions to help define the threat and identify appropriate controls and mitigants," he added.

It's also worth exploring how regulators can use AI to "enhance our ability to monitor and detect patterns of fraudulent activity at regulated institutions in real time," he said. This could help provide early warnings to affected institutions and broader industry participants, as well as to protect our own systems."

Earlier this month, Bloomberg reported that hackers spied on the emails of around 100 banking regulators at the Office of the Comptroller of the Currency for more than a year, infiltrating messages comprising agency deliberations and sensitive details about the banks it oversees.