At this point, the idea of artificial intelligence generating content is nothing new. You’ve likely seen plenty of videos and pictures of AI-generated content all over Facebook or YouTube. When I first started seeing this Generative AI content, I was somewhat impressed, but the content was still generally easy to spot and dismiss as fake. As easy as it was to spot those fake photos and videos, I had two thoughts at the time:
- These generative AI tools are only going to get better as they train on more data and;
- Like any emerging technology, someone out there will use this as a vehicle to commit fraud.
The Rise of Generative AI – And Its Dark Side
Based on those two trains of thought, I began considering the implications of generative AI in the forensic account space and became increasingly concerned. As forensic accountants, we all learn about the three main ingredients of a fraud scheme: pressure (outside force pushing someone to commit fraud), rationalization (what someone tells themselves to make fraud an acceptable course of action), and opportunity (how easy it is to commit fraud). Generative AI probably hasn’t moved the needle up or down for the pressure or rationalization of ingredients, but opportunity? That has skyrocketed.
The Fraud Triangle Meets Technology
All you must do to understand why opportunity has skyrocketed is to take a moment and consider the barrier to entry for creating fraudulent documents. In the past, to create a forged document like an invoice or receipt, you needed a decent bit of expertise with software like Photoshop and Acrobat. For someone who is considering their opportunity to commit fraud, that small amount of work may be enough to deter their efforts. However, I can now go into ChatGPT and create a very passable, totally fake receipt with a few prompts, a little tweaking, and 5-10 minutes. Remember that this is not some dark-web AI tool – this is the most used generative AI tool in the world.
Faking It Has Never Been Easier
It isn’t perfect, but would it get by a quick review of an expense report? It would not surprise me at all if it did. As a forensic accountant, I have seen that abuse of employee reimbursement processes is one of the most prevalent forms of occupational fraud (that is, employees, committing fraud against their employer), especially within smaller, family-owned businesses with limited internal controls.
If that isn’t concerning enough, take this to its logical extent. If I can use AI tools to create forged receipts, like the one above, could I create fake invoices, purchase orders, and bills of lading to conceal the misappropriation of inventory? Could I create a fake ID and employment documentation to add a ghost employee to the payroll? Fake bank statements to “validate” transfers to a personal account? The answer to all the above is yes, and it probably won’t cost a dime or take longer than 20 minutes to do it. Also, I’m only writing about occupational fraud here. The level of consumer fraud utilizing these tools will also be staggering.
Real-World Risks for Businesses
These generative AI tools can do some amazing things, but they are also seriously beneficial to fraudsters. I urge every business owner/operator to review your internal control policies and procedures addressing document validation. The days of relying on manual documentation to review for validation may end.
Can AI Catch AI? Tools That Fight Back
Luckily, the same technologies used to commit fraud are also used to prevent fraud. There are many companies out there that have developed software designed specifically to detect AI-generated documents and photos.
What Business Leaders Should Know
Take stock of your current internal controls, assess your options, and most importantly, keep yourself informed on the capabilities of generative AI. The discussion around generative AI focuses on its ability to transform how we work. Still, our job as forensic accountants is to keep the public and our clients apprised of how emerging technology can transform how fraudsters try to exploit them.
