ProKYC is a recently revealed artificial intelligence (AI)-powered deep fake tool that nefarious actors can use to circumvent high-level Know Your Customer (KYC) protocols on cryptocurrency exchanges, presenting as a very sophisticated method to circumvent high-level KYC protocols. A recent report from cybersecurity firm Cato Networks refers to this development as an indication that cybercriminals have stepped up their tactics to get ahead of law enforcement.
It has been common practice for identity fraud to involve people buying forged documents on the dark web to commit the crime. There is a difference in approach, however, between ProKYC and another company. Fraudsters can use the tool in order to create entirely new identities, which they can use for fraud purposes. Cato Networks report that the AI tool is aimed at targeting crypto exchanges and financial institutions with the special purpose of exploiting them.
When a new user registers with one of these organizations, they use technology to verify that he is who he claims to be. During this process, a government-issued identification document, such as a passport or driver's license, must be uploaded and matched with a live webcam image that is displayed on the screen.
A design in ProKYC maximizes the ability of customers to bypass these checks by generating a fake identity, as well as a deepfakes video. Thereby, criminals are able to circumvent the facial recognition software, allowing them to commit fraud.
As noted in the press release from Cato Networks, this method introduces a new level of sophistication to the crypto fraud industry. A Cato Networks report published on Oct. 9 reported that Etay Maor, the company's chief security strategist, believes that the new tool represents a significant step forward in terms of what cybercriminals are doing to get around two-factor authentication and KYC mechanisms.
In the past, fraudsters were forced to buy counterfeit identification documents on the dark web, but with AI-based tools, they can create brand-new ID documents from scratch.
This new tool was developed by Cato specifically for crypto exchanges and financial firms whose KYC protocols require matching photos of a new user's face to their government-issued identification documents, such as a passport or a driver's license taken from the webcam of their computers.
Using the tool of ProKYC, we have been able to generate fake ID documents, as well as accompanying deepfake videos, in order to pass the facial recognition challenges used by some of the largest crypto exchanges around the world.
The user creates an artificially intelligent generated face, and then adds that AI-generated profile picture to a template of a passport that is based on an Australian passport.
The next step is the ProKYC tool, which uses artificial intelligence (AI) to create a fake video and image of the artificially generated person, which is used to bypass the KYC protocols on the Dubai-based crypto exchange Bybit, which is not in compliance with the Eurozone.
It has been reported recently by the cybersecurity company Cato Networks that a deepfake AI tool that can create fake fake accounts is being used by exchanges to evade KYC checks that are being conducted.
There is a tool called ProKYC that can be downloaded for the price of 629 dollars a year and used by fraudsters to create fake identification documents and generate videos that look almost real.
This package includes a camera, a virtual emulator, facial animations, fingerprints, and an image generation program that generates the documents that need to be verified.
A recent report highlights the emergence of an advanced AI deepfake tool, custom-built to exploit financial companies’ KYC protocols.
This tool, designed to circumvent biometric face checks and document cross-verification, has raised concerns by breaching security measures that were previously impenetrable, even by the most sophisticated AI systems.
The deepfake, created with a tool known as ProKYC, was showcased in a blog post by Cato Networks. It demonstrates how AI can generate counterfeit ID documents capable of bypassing KYC verification at exchanges like Bybit.
In one instance, the system accepted a fictitious name, a fraudulent document, and an artificially generated video, allowing the user to complete the platform’s verification process seamlessly.
Despite the severity of this challenge, Cato Networks notes that certain methods can still detect these AI-generated identities.
Techniques such as having human analysts scrutinize unusually high-quality images and videos or identifying inconsistencies in facial movements and image quality are potential safeguards.
Legal Ramifications of Identity Fraud
The legal consequences of identity fraud, particularly in the United States, are stringent. Penalties can reach up to 15 years in prison, along with substantial fines, depending on the crime's scope and gravity. With the rise of AI tools like ProKYC, combating identity fraud is becoming more difficult for law enforcement, raising the stakes for financial institutions.
Rising Activity Among Scammers
In addition to these developments, September saw a marked increase in deepfake AI activity among crypto scammers. Gen Digital, the parent company of Norton, Avast, and Avira, reported a spike in the use of deepfake videos to deceive investors into fraudulent cryptocurrency schemes. This uptick underscores the need for stronger security measures and regulatory oversight to protect the growing number of investors in the crypto sector.
The advent of AI-powered tools such as ProKYC marks a new era in cyber fraud, particularly within the cryptocurrency industry. As cybercriminals increasingly leverage advanced technology to evade KYC protocols, financial institutions and exchanges must remain vigilant and proactive. Collaboration among cybersecurity firms, regulatory agencies, and technology developers will be critical to staying ahead of this evolving threat and ensuring robust defenses against identity fraud.
