Generative AI, Pig Butchering, And Triangulation Scams Are Among the Biggest Fraud Threats, Visa Says

New technologies such as generative AI are making it easier for fraudsters to scam consumers, according to the spring edition of Visa Inc.’s 2024 Biannual Fraud Threats report, just released.

What makes generative AI such an effective fraud tool is that it can be used to convince consumers to give up personally identifiable information, such as Social Security or account numbers. Criminals will use the technology to perpetrate phishing scams free of misspelled words and other telltale signs of a phishing scam.

Generative AI is capable of generating text, images, or other data using so-called generative models, often in response to prompts. The models also learn the patterns and structure of their input training data and then generate new data that has similar characteristics.

“Generative AI makes phishing scams more effective when it comes to the data-acquisition phase of the scam, which is deceiving consumers to reveal sensitive data or send a payment,” says Trace Fooshee, strategic advisor, fraud and AML (anti-money laundering), at the consultancy Datos Insights. “There is a lot of anxiety among those charged with protecting consumers from fraud over the use of Generative AI.”

Another concern is that when these models are used for phishing scams to collect consumer data, they bypass traditional fraud-detection technologies. “Generative AI is used further upstream in the scam to deceive consumers,” Fooshee says.

Yet another scam gaining popularity with fraudsters is pig butchering. Pig butchering marries romance scams, which leverage social media to gain the trust or affection of a potential victim, with investment scams, which trick people into putting money into a phony investment. An example of this scam is luring consumers to invest in a bogus cryptocurrency platform.

Ten percent of adults surveyed by Visa have been targeted in a pig-butchering scam. In November, the U.S. Department of Justice seized more than $9 million in cryptocurrency that came from scam profits gained by a criminal organization perpetrating a single pig-butchering scam, according to the Visa report.

“Pig butchering is a huge problem and growing at a troubling pace,” says Fooshee. “What makes it so concerning is that, unlike investment scams, which trick people into making a one-time payment, Pig butchering scams come after victims for repeated payments. Instead of losing $5,000 on a one-time investment, people lose $50,000 over multiple investment payments.”

Another tactic gaining popularity with fraudsters is triangulation scams. Here, fraudsters create illegitimate online storefronts offering in-demand products at a low cost to collect payment information. Legitimate merchants fulfill the online order, but payment information is already compromised.

“Triangulation scams can cost merchants up to $1 billion in a single month, and have even been tied to human-trafficking schemes that lure victims to work in online scam centers against their will,” Michael Jabbara, Visa’s senior vice president, global head of fraud services, says by email. “Weak merchant onboarding practices are contributing to an increase in triangulation fraud, as they enable bad actors to establish fraudulent merchants, as well as capitalizing on rising consumer goods costs, so that people are looking for deals for their favorite products.”