A recent warning from Cato Networks highlights a new threat to crypto exchanges, involving the use of AI-based deepfake technology to create fake accounts for money laundering.

Rise of Fake Identities and Accounts

According to Cato Networks’ report, deepfake tools are actively sold on underground markets, allowing criminals to bypass identity verification on exchanges. The aim is to create new, verified accounts with fake credentials for illegal activities like money laundering and fraud. The report reveals that in 2023, losses caused by fake accounts exceeded $5.3 billion, a significant increase from 2022.

How Deepfake Technology Is Being Exploited

Malicious actors use AI to generate fake identity documents and images. These tools create realistic copies of documents like passports, used to bypass face recognition systems with deepfake videos. Once the fake documents are submitted, a verified account is created on the exchange.

Recommendations for Crypto Exchanges

Cato Networks stressed that crypto exchanges must upgrade their security systems to counter these threats. The firm advises that technical measures alone won’t suffice; exchanges should incorporate human intelligence (HUMINT) and open-source intelligence (OSINT) for more robust threat tracking.

AI-powered deepfake technologies pose a significant risk to the crypto industry by targeting security vulnerabilities and enabling fraud. It is crucial for exchanges and users to keep security protocols up to date to counter this growing threat, as the crypto sector swiftly evolves, creating new opportunities for cybercriminals.