US Regulator Proposes AI-Driven Strategy to Combat Crypto Fraud Targeting Seniors
A US state securities regulator is set to propose a strategy to protect Americans from a surge in digital asset fraud driven by increasingly sophisticated artificial intelligence tools. Claire McHenry, deputy director of the Nebraska Department of Banking and Finance (NDBF) and president of the North American Securities Administrators Association (NASAA), will present her testimony before the Securities and Exchange Commission (SEC) Investor Advisory Committee on March 6.
McHenry's testimony will highlight a significant increase in digital asset fraud, with scammers leveraging AI, social media, and cryptocurrency ATMs to exploit retail investors in America, especially seniors. According to NASAA's 2024 Enforcement Report, digital assets were cited more frequently in investigations and enforcement actions than any other financial product or scheme, including stocks, Ponzi schemes, internet-based fraud, and promissory notes.
Key Points from McHenry's Testimony
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Surge in Crypto-Related Fraud: The number of complaints, investigations, and enforcement actions involving digital assets continues to grow. Scammers are increasingly using sophisticated AI tools to target vulnerable investors.
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Cryptocurrency ATMs as Fraud Tools: Most financial fraud involves cryptocurrency ATMs, with scammers often convincing victims to deposit cash into these ATMs and collect funds in the form of cryptocurrencies.
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Impact on Older Americans: Crypto fraud disproportionately affects older Americans, who are targeted through tech support scams and investment scams. These investors are tempting targets as they have accumulated wealth over their lifetimes but may lack the technological savvy needed to detect and avoid scams.
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Need for Regulatory Collaboration: McHenry emphasizes the need for regulators to shift from relying on "tips and tricks" to emphasizing media literacy and regulatory collaboration. She stresses the importance of avoiding victim-blaming language and instead focusing on rebuilding confidence and encouraging reporting.
Solutions and Recommendations
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AI Fraud Detection: McHenry highlights the importance of implementing stronger AI fraud detection systems to identify and prevent fraudulent activities.
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Investor Education: Improved investor education is crucial to helping Americans recognize and avoid crypto scams.
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Regulatory Action: The testimony calls for increased regulatory efforts to combat digital asset fraud and protect retail investors.
