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  • Writer's pictureKen Yormark

Artificial Intelligence Fraud Risk

Updated: May 2, 2023


With "The Godfather of A.I. "Geoffrey Hinton, leaving Google and Warning of Danger Ahead and other recent scary prognostications I felt this post worthy of a rebroadcast.

When you google fraud risk and artificial intelligence (AI), why do you get endless findings advertising detection software but no information about the risks? AI will continue to enhance fraud detection and potentially improve many areas of business and society, however, AI also presents risks and challenges. Here are some of the risks you should consider when working with artificial intelligence:

Data Fraud: AI models rely on large amounts of data to learn and make decisions. If the data used to train the model is manipulated or fake, the AI system may make incorrect decisions or produce fraudulent outcomes.

Algorithmic Bias: If trained on partisan data, AI models can perpetuate existing biases. This can result in discriminatory outcomes and perpetuate systemic inequalities.

Model Hacking: Malicious actors may try to manipulate the AI model by feeding it false data or modifying its parameters. By reverse engineering the model to understand how it works they can exploit that knowledge causing the AI system to produce fraudulent results.

Model Stealing: AI models themselves can be valuable assets and can be stolen or used without permission. This can lead to a loss of intellectual property or the production of fraudulent outcomes.

Black Box Models: Many AI models are considered "black boxes" because it can be difficult to understand how they produce decisions. This can make it challenging to detect and prevent fraud.

Model Overfitting: Overfitting occurs when an AI model is trained too closely on a specific dataset, leading to a poor generalization of new data. This can result in the model being easily manipulated by attackers.

Privacy Concerns: AI systems often process sensitive information such as personal or financial data, making them a prime target for hackers looking to steal this material.

Job Displacement: AI systems have the potential to automate many jobs, which can lead to disgruntled employees attempting to manipulate and destroy software.

Dependence on AI: As we become more dependent on AI systems, there is a risk of over-reliance on these systems and a decreased ability to detect and respond to fraud or other issues.

It's essential to be aware of these risks and to take steps to mitigate them, such as conducting regular risk assessments, implementing strong security measures, regularly auditing, and ensuring that AI systems are transparent, explainable, and subject to ethical and legal oversight. The quintessential term “garbage in, garbage out” cannot be overemphasized.

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