Deep Fakes: 3 Areas of Concerns for Wealth Management

In case you are not yet aware, Taylor Swift has fallen victim to deepfake technology driven by generative AI. Pornographic images falsely depicting Taylor Swift emerged on X/Twitter, attracting over 45 million views before the platform took them down.

This is not a new phenomenon: deepfakes have been around for years. However, the rise of generative AI has made it easier than ever to create deepfakes.

This horrid and unfortunate incident brings to light the negative impact that AI can have on society and we've seen it loud and clear these last 48 hours.

While this topic is trending on X and it's brought to light concerns about AI safety and AI regulation it's important to discuss about how deep fakes and bad actors can use generative AI in wealth management.

I see three core areas to bring to attention: client trust, regulatory compliance, and investment decisions.

Client Trust

Deepfakes can erode client trust, a critical component in the wealth management industry. Fraudsters can use deepfakes to impersonate financial advisors or other trusted figures, leading to potential scams or misinformation campaigns

For instance, a financial advisor in Sydney used deepfake technology to create a digital clone of himself to interact with clients, which was well-received.

However, if used maliciously, such technology could damage the advisor-client relationship. And it's not impossible to create these digital clones.

Regulatory Compliance

Regulatory bodies are increasingly warning about the risks of deepfakes. The Autorité des marchés financiers (AMF) has warned that scammers can use deepfakes to trick investors into fictitious investments.

Similarly, the Securities and Exchange Commission (SEC) has expressed concern about the potential for AI-induced fraud or market tumult.

Advisors and firms must stay abreast of these regulatory concerns and ensure they have robust compliance measures in place to detect and mitigate the risks posed by deepfakes.

Investment Decisions

Deepfakes can also impact investment decisions. For example, bad actors could use deepfakes to falsely portray positive events about a company, potentially influencing its stock price. In one instance, a fake image purportedly of the Pentagon on fire briefly caused stocks to dip.

Advisors must be vigilant about verifying the authenticity of information used to make investment decisions.

Mitigation Strategies:

1. Enhancing Security Measures

One of the primary ways to mitigate the risks associated with deepfakes is by enhancing security measures. This includes implementing strong security procedures and investing in advanced detection technologies. For instance, AI can be used to identify abnormal behavior patterns that may indicate fraudulent activities

Additionally, financial institutions can use AI to predict cyber threats, simulate security scenarios, and pinpoint anomalies, providing a richer, real-time defense strategy.

Continuous Learning and Training

Continuous learning and training are essential to ensure checks and balances, maintaining the reliability of content generated by Generative AI in financial institutions.

This involves staying updated on the latest advancements in deepfake technology and understanding how they can be used maliciously. It also includes training staff to recognize potential deepfakes and respond appropriately.

2. Robust Encryption and Data Privacy Measures

With the advancement of Generative AI, the risk of unauthorized access and data manipulation escalates. Therefore, financial institutions need to implement robust encryption and data privacy measures to safeguard sensitive data.

3. Collaboration with Regulatory Bodies

Financial institutions should also collaborate with regulatory bodies to address the challenges posed by deepfakes. This includes complying with existing regulations and contributing to the development of new guidelines that specifically address the risks associated with deepfakes

4. Client Education

Educating clients about the risks of deepfakes is probably one of the more important mitigation strategies. This can involve informing clients about what deepfakes are, how they can be used in scams, and what they can do to protect themselves.

For instance, clients should be advised to verify any unusual requests they receive, such as a request to transfer funds to a new account.

While the rise of deepfakes due in AI presents significant challenges to the wealth management industry, these risks can be mitigated through a combination of enhanced security measures, continuous learning and training, robust encryption and data privacy measures, collaboration with regulatory bodies, and client education

Jonathan Michael is the Founder & CEO of Wealth I/O - a marketing engine helping advisors scale client acquisition faster with data-rich leads and marketing productivity AI that help advisors save 80% of time each week on routine marketing tasks.