Financial services face up to deepfake risks

Deepfake incidents in the financial sector increased within Europe by over 780 per cent last year. Given the threats this technology presents to customer onboarding, fraud detection and systems security, Caroline Dawson and Oscar Tang outline the regulatory landscape and suggested actions for firms.

Caroline Dawson (caroline.dawson@cliffordchance.com) is a partner at Clifford Chance London specialising in market regulation, mergers and acquisitions in the financial sector, along with securities and derivatives transactions. Senior associate Oscar Tang (oscar.tang@cliffordchance.com) focuses on complex technology issues and has extensive experience in strategic contracting for AI systems, cybersecurity and representing clients in digital regulatory matters; he is a member of the Chartered Institute of Information Security.

The growing sophistication and prevalence of deepfake technology raises significant challenges for financial services firms. Alongside interest in innovative and legitimate uses for synthetic content, concern regarding potential misuse is resulting in heightened attention from policymakers and regulators in the United Kingdom and elsewhere. The utilisation by bad actors of deepfakes in the financial services context to distort identity verification, compromise monitoring systems and create targeted phishing attacks has exacerbated fraudulent activities on an unprecedent scale, and poses new challenges to firms trying to keep up with the pace of innovation along with the development of lifelike deepfakes.