The rapid advancement of artificial intelligence (AI) is fuelling a surge in “synthetic fraud,” where criminals manipulate both real and fabricated personal information to create fake identities. Credit information firm Experian has raised concerns about the growing threat, warning that AI is making it easier than ever to commit large-scale financial fraud.
A 60% surge in synthetic identity fraud
Experian’s analysis of fraudulent and potentially fraudulent credit applications has revealed a 60% annual increase in false identity cases in 2024. The company attributes this sharp rise to AI’s ability to swiftly generate synthetic identities, allowing fraudsters to deceive financial institutions with unprecedented efficiency.
Traditionally, identity theft required criminals to sift through discarded documents, search public records, or purchase stolen data from the dark web. However, AI has eliminated much of this manual effort. Advanced AI tools can now generate highly convincing fake identities, produce near-authentic identity documents, and automate large-scale fraud attacks.
AI-generated images, fake social media profiles, and fabricated biometric data make it significantly harder for financial institutions to detect fraud, Experian warns. As fraudsters refine their tactics, banks and lenders face increasing challenges in distinguishing real customers from synthetic ones.
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Financial institutions struggling to keep up
Despite the growing threat, many financial institutions feel ill-equipped to combat synthetic fraud effectively. A recent YouGov survey commissioned by Experian in February 2025 found that only 25% of British financial service companies feel confident in tackling synthetic identity fraud.
This lack of confidence highlights a significant vulnerability in the financial sector, as fraudsters continue to exploit weaknesses in traditional fraud detection systems. With AI-generated identities becoming more sophisticated, companies must invest in advanced fraud prevention technologies to keep up with the evolving threat.
How AI is fueling the rise of synthetic fraud
AI-powered fraud techniques include:
- Fake identity generation: AI can create entirely new identities by combining real and fake personal details, making fraudulent applications appear legitimate.
- Deepfake documents: Fraudsters use AI to forge government-issued IDs, passports, and driving licences that look virtually identical to genuine ones.
- Social engineering scripts: AI generates realistic, convincing scripts for phishing scams, making it easier to manipulate individuals into providing sensitive information.
- Automated fraud attacks: Criminals use AI to rapidly submit multiple fraudulent applications, increasing their chances of success before detection.
Experian’s Tristan Prince, Fraud and Financial Crime Director for the UK & Ireland, warns that the availability of compromised personal data on the dark web has made it even easier for criminals to create synthetic identities. He explains:
“Historically, synthetic identity fraud was difficult for criminals to carry out, as they needed real personal information, often obtained through bin-rummaging or public records. But now, with AI and vast amounts of stolen data on the dark web, creating a synthetic identity has never been easier. Criminals can generate fake images, set up email addresses, and even produce AI-driven social engineering scripts within seconds.”
AI solutions: A defence against AI-driven fraud
While AI is driving a new wave of cybercrime, it is also playing a critical role in fighting fraud. Financial institutions are increasingly deploying AI-driven fraud detection systems that analyse behavioural patterns, detect anomalies, and verify identities with biometric authentication.
Prince emphasises the importance of a multi-layered approach to fraud prevention:
“AI solutions are also at the forefront of solving the problem. Fraud prevention systems incorporating biometric and behavioural technology are critical for financial institutions to stay ahead of criminals. In 2025, the fight against fraud must be led by the same technology being used to perpetrate it.”
Experian’s fight against financial fraud
Over the past five years, Experian has successfully prevented over £9.5 billion in fraudulent applications across the UK and Ireland. The company continues to develop cutting-edge fraud detection systems, leveraging AI to help banks, lenders, and businesses combat synthetic fraud attacks.
As AI technology evolves, both fraudsters and security experts are engaged in a continuous battle. The financial industry must adapt swiftly, invest in advanced AI-driven fraud prevention, and collaborate on best practices to stay ahead of cybercriminals.
With AI-driven synthetic fraud on the rise, financial institutions and regulators must act decisively to protect consumers, businesses, and the integrity of the financial system.
