The rise of AI-powered scams and sophisticated impersonation tactics has prompted the Financial Industry Regulatory Authority (FINRA) to issue a warning about escalating fraud risks targeting retail investors, with crypto-related scams emerging as a primary concern. The discussion took place at the 2025 FINRA Annual Conference, where industry experts and regulators gathered to address evolving financial fraud tactics in a session titled “Mitigating Impacts of Fraud and Scams Targeting Customers.”
The panel included Christine Kieffer, Senior Director of Investor Education at FINRA; Brooks Brown, Senior Director at FINRA’s High-Risk Registered Representative Unit; Tara Ambrose, Senior Financial Fraud Ombudsperson at the Minnesota Department of Commerce; and Bismarck Prado, Director of Fraud & Senior Investor Protection at Commonwealth Financial Network.
AI-Powered Crypto Scams Emerge as Major Threats
Kieffer opened the session by noting that AI-driven scams are rapidly becoming more sophisticated, making it harder for victims to identify fraudulent activities. According to Federal Trade Commission (FTC) data, crypto investment scams accounted for $5.7 billion in consumer losses in 2024, placing them among the top three most prevalent fraud categories.
Ambrose highlighted how many of these scams originate from tech support pop-ups that prompt victims to call a fake customer support number. Once connected, fraudsters impersonate bank representatives or government officials, convincing victims to move funds into fake crypto wallets. “It all starts with a seemingly innocent popup, but it ends with victims being told to move money to cryptocurrency addresses controlled by scammers,” Ambrose explained.
Prado discussed how impersonation scams have evolved, with scammers now leveraging AI-generated videos and deepfake voices to create convincing personas. “Scammers keep victims on the line while instructing them to deposit money into Bitcoin ATMs, ensuring they don’t hang up or alert anyone,” Prado said.
Brown underscored the impact of AI on fraud tactics, stating that modern phishing schemes now appear more professional, devoid of the usual spelling errors and inconsistencies. “Phishing materials now look like legitimate emails, making it harder for victims to spot red flags,” he said.
Preventing Fraud: A Multi-Departmental Approach
The panel emphasized that tackling AI-driven fraud requires a coordinated effort across departments, not just the compliance team. Brown recommended using FINRA Rule 2165, which allows firms to place temporary holds on suspicious account activity, as a preventive measure.
Ambrose suggested that firms educate their clients on the latest scam tactics and implement “smart friction” measures, such as additional verifications for crypto withdrawals. Meanwhile, Prado stressed that fraud prevention must now include real-time monitoring to identify fraudulent activity before funds are moved.
FAQ Section:
Q1: How are AI tools being used in crypto scams?
Scammers use AI to create realistic phishing emails, deepfake videos, and voice impersonations, making it easier to deceive victims and convince them to transfer funds or provide personal information.
Q2: What can financial institutions do to prevent fraud?
Firms should integrate fraud prevention measures across multiple departments, implement additional verification steps for crypto transactions, and educate clients about emerging scam tactics to reduce vulnerabilities.
