Surge in deepfakes heightens fraud risk for African businesses
Generative artificial-intelligence was behind more than a third of new biometric fraud cases in Africa last year, a report found, with a surge in deepfakes threatening the data of millions of consumers whose details are held on insecure systems.
Deepfake videos used to impersonate people increased sevenfold in the second half of 2024, according to data from the Lagos-based digital verification company SmileID. The seven-year-old startup vets customer identities for hundreds of businesses on the continent including Uber.
Smile ID found document forgery remains a sizable aspect of identity fraud, especially in East Africa where the crime rose by six percentage points last year. But generative AI has 'radically' increased manipulation opportunities, posing fresh challenges for security and anti-money laundering enforcement, chief executive Mark Straub told Semafor.
One crime syndicate that operated on Telegram and communicated in Chinese ramped up attacks on African companies in 2024. The gang was 'a substantial, coordinated ring of attackers that were sharing hacking tools' to target fintechs on the continent as well as companies in Germany and Singapore, he said.
The hackers' IP addresses suggested their locations were 'not within Africa' and their efforts seemed geared towards creating accounts they could use to move money, Straub added. Activity from the group declined after the US Federal Bureau of Investigation and African law enforcement bodies were notified by SmileID, he said, but 'there are many more out there.'
Growth in smartphone ownership and internet access in Africa has sped up demand for digital banks, e-commerce stores, and ride-hailing apps. But the risk of fraud that hovered over analog systems is being carried over into the digital transition.
About 500 million people lack any legal ID documents in sub-Saharan Africa. But in countries where digital IDs are being introduced, some companies have failed to follow best practice, setting up ID systems before data protection and cybersecurity frameworks are in place, for instance, and exposing those systems and their users to hazards and losses.
In South Africa, frequent ID requests from government agencies and service providers leave paper trails that increase the chances of identity theft, said Martin Grunewald, an executive at the verification company Secure Citizen. And the amount Nigerian financial institutions lost to fraud rose nearly six-fold to 18 billion naira ($11 million) in 2023. NIBSS, the agency that published the data, said fraud losses rose in line with the rise in digital payments.
Generative AI raises the prospect of more losses from fraud in Africa. While deepfakes accounted for 7% of global identity fraud attempts, according to the London-based verification company Sumsub, this was a four-fold rise from 2023. Only the Middle East recorded a larger increase in deepfake identity fraud incidents than Africa in 2024, Sumsub found.
The rise in generative AI and identity fraud has presented a lucrative business and investment opportunity for the companies working to counter it in Africa.
SmileID is backed by venture capital, raising about $27 million over the past four years from Silicon Valley and African investors. YouVerify, a competitor partly based in Nigeria, has raised $5 million in recent years from a venture fund including the French telecoms giant Orange.
Projections for the future size of the global identity verification market — which these startups are aiming for — range from $27 billion to $47 billion.
'Doing KYC [Know Your Customer verification checks] used to be just a compliance exercise,' Straub said. 'It really now is a security workstream [concern]. That's the big change for us.'
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