Rapid developments in generative artificial intelligence (AI) are fuelling a new wave of fraud in Africa, with fraudsters using AI to create hyper-realistic documents, images and voices to beat verification systems.
- •Deepfake incidents increased sevenfold from Q2 to Q4 2024, according to an analysis by identity-verification platform, Smile ID as fraudsters exploit existing weaknesses in current verification and security systems.
- •A global poll by Deloitte reveals that 25.9% of executives have reported that their companies’ financial and accounting systems have been targeted by deepfake incidents.
- •According to SmileID, this resulted in a spike in biometric fraud attempts to its highest quarterly average in three years.
“Once a weakness is discovered, it is exploited at scale, driving large volumes of attacks through a single entry point. These evolving tactics pose significant risks to trust, revenue, and operational stability,” Mark Straub, CEO at Smile ID, said.
Overall, biometric fraud surpassed document fraud in 2024, surging at 16% between April and June but slightly dropping to 13% in the last quarter. Document fraud in Africa rose from 4% in the first quarter of last year to 9% in the last quarter. Biometric fraud, unlike document fraud, is intended to manipulate the vulnerabilities in a verification mechanism.
“The availability of free or low-cost AI tools has lowered the barriers for fraudsters, making it easier for them to create higher-quality biometric fraud attempts,” said Andy Hess, Senior ML engineer at Smile ID.
In 2024, document fraud was highest in East Africa, while biometric fraud was highest in West Africa. East Africa’s prominence is primarily driven by “the reliance on outdated, inconsistent, and poor-quality identity documents.” The region’s fraud rates were highest in Q1 and Q3 2024.
National Identity Cards (IDs) recorded the highest fraud rate in 2024 at 27% because they are primary documents for identification and verification in almost all important processes. They were followed by Driver’s Licenses at 24%, passports at 20%, work permits at 19%, and voter’s IDs at 14%.
“While Passports and other specialised documents like Work Permits have lower fraud rates, their misuse often involves high-stakes activities, such as international travel or employment fraud, with significant financial and reputational risks,” the report noted.
Fintechs are Bearing the Brunt
The industries most targeted by fraud in 2024 were finance, e-commerce, and crypto. Digital banks were most affected with fraud cases peaking to 35% last year, followed by Microfinance institutions where they peaked to 30%. Digital banks are at high risk due to their lower kYC requirements and faster transaction rates, which fraudsters find ideal for layered money laundering.
Android devices were notably the most commonly used by fraudsters in the continent, averaging at 16% of devices blocked in 2024 for attempting fraud. On the other hand, iOS devices saw a rising trend in fraud attempts – averaging at 10%.
The need to combat fraud and its evolving forms has spurred demand for digital identification platforms in both corporates and government agencies. Smile ID determines that most fraud targets account logins, high-value transactions, and password recovery attempts – which imply that sealing the loopholes with an advanced biometric KYC platform could effectively reduce fraud rates.
Adopting such measures will require intense collaboration and sharing of information between different entities. Businesses are urged to invest in tools that can adequately detect attempted identity breaches and adopt multi-factor authentication strategies.
