Get Ready For Deepfakes To Be Used In Financial Scams

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Last month, scammers hijacked the Twitter accounts of former President Barack Obama and dozens of other public figures to trick victims into sending money. Thankfully, this brazen act of digital impersonation only fooled a few hundred people. But artificial intelligence (AI) is enabling new, more sophisticated forms of digital impersonation. The next big financial crime might involve deepfakes—video or audio clips that use AI to create false depictions of real people.Deepfakes have inspired dread since the term was first coined three years ago. The most widely discussed scenario is a deepfake smear of a candidate on the eve of an election. But while this fear remains hypothetical, another threat is currently emerging with little public notice. Criminals have begun to use deepfakes for fraud, blackmail, and other illicit financial schemes.This should come as no surprise. Deception has always existed in the financial world, and bad actors are adept at employing technology, from ransomware to robo-calls. So how big will this new threat become? Will deepfakes erode truth and trust across the financial system, requiring a major response by the financial industry and government? Or are they just an exotic distraction from more mundane criminal techniques, which are far more prevalent and costly?The truth lies somewhere in between. No form of digital disinformation has managed to create a true financial meltdown, and deepfakes are unlikely to be the first. But as deepfakes become more realistic and easier to produce, they offer powerful new weapons for tech-savvy criminals.Consider the most well-known type of deepfake, a “face-swap” video that transposes one person’s expressions onto someone else’s features. These can make a victim appear to say things she never said. Criminals could share a face-swap video that falsely depicts a CEO making damaging private comments—causing her company’s stock price to fall, while the criminals profit from short sales.At first blush, this scenario is not much different than the feared political deepfake: a false video spreads through social or traditional media to sway mass opinion about a public figure. But in the financial scenario, perpetrators can make money on rapid stock trades even if the video is quickly disproven. Smart criminals will target a CEO already embroiled in some other corporate crisis, who may lack the credibility to refute a clever deepfake.In addition to video, deepfake technology can create lifelike audio mimicry by cloning someone’s voice. Voice cloning is not limited to celebrities or politicians. Last year, a CEO’s cloned voice was used to defraud a British energy company out of $243,000. Financial industry contacts tell me this was not an isolated case. And it shows how deepfakes can cause damage without ever going viral. A deepfake tailored for and sent directly to one person may be the most difficult kind to thwart.AI can generate other forms of synthetic media beyond video and audio. Algorithms can synthesize photos of fictional objects and people, or write bogus text that simulates human writing. Bad actors could combine these two techniques to create authentic-seeming fake social media accounts. With AI-generated profile photos and AI-written posts, the fake accounts could pass as human and earn real followers. A large network of such accounts could be used to denigrate a company, lowering its stock price due to false perceptions of a grassroots brand backlash.These are just a few ways that deepfakes and other synthetic media can enable financial harm. My research highlights ten scenarios in total—one based in fact, plus nine hypotheticals. Remarkably, at least two of the hypotheticals already came true in the few months since I first imagined them. A Pennsylvania attorney was scammed by imposters who reportedly cloned his own son’s voice, and women in India were blackmailed with synthetic nude photos. The threats may still be small, but they are rapidly evolving.

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Michigan Supreme Court: Selling A $24,000 House (And Keeping The Proceeds) Over An $8.41 Debt Is Unlawful

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This seems like the sort of thing a court shouldn't need to sort out, but here we are. More specifically, here are two plaintiffs suing over Oakland County, Michigan's forfeiture policy. This isn't civil asset forfeiture -- where property is treated as guilty until proven innocent. This isn't even criminal asset forfeiture -- the seizure of property by the government following a conviction.But this form of forfeiture can be just as abusive as regular civil asset forfeiture. There's no criminal act involved -- real or conjectured. It's the result of a civil violation: the nonpayment of property taxes. And Oakland County, the plaintiffs argue, is performing unconstitutional takings to unjustly enrich itself.It's not that these sorts of things are uncommon. Tax liens are often put on property when tax payments are delinquent. It's that one of these seizures -- and subsequent auction -- was triggered by a delinquent amount that would have required the county to make change from a $10 bill. (via Volokh Conspiracy)This is from the opening of the state Supreme Court's decision [PDF], which shows just how much the county government can profit from these forfeitures.

Plaintiff Rafaeli, LLC, owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Oakland County and its treasurer, Andrew Meisner (collectively, defendants), foreclosed on Rafaeli’s property for the delinquency, sold the property at public auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties, and fees.

The circuit court granted summary disposition to defendants, finding that defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in their properties when they failed to pay the taxes due on the properties. The court determined that property properly forfeited under the GPTA [General Property Tax Act] and in accordance with due process is not a “taking” barred by either the United States or Michigan Constitution. Because the GPTA properly divested plaintiffs of all interests they had in their properties, the court concluded that plaintiffs did not have a property interest in the surplus proceeds generated from the tax-foreclosure sale of their properties.

At the same time that it was common for any surplus proceeds to be returned to the former property owner, it was also generally understood that the government could only collect those taxes actually owed and nothing more.[...]This Court recognized a similar principle in 1867, stating that “[n]o law of the land authorizes the sale of property for any amount in excess of the tax it is legally called upon to bear.” Indeed, any sale of property for unpaid taxes that was in excess of the taxes owed was often rendered voidable at the option of the landowner. Rather than selling all of a person’s land and risk the sale being voided, officers charged with selling land for unpaid taxes often only sold that portion of the land that was needed to satisfy the tax debt. That is, early in Michigan’s statehood, it was commonly understood that the government could not collect more in taxes than what was owed, nor could it sell more land than necessary to collect unpaid taxes.

We conclude that our state’s common law recognizes a former property owner’s property right to collect the surplus proceeds that are realized from the tax-foreclosure sale of property. Having originated as far back as the Magna Carta, having ingratiated itself into English common law, and having been recognized both early in our state’s jurisprudence and as late as our decision in Dean in 1976, a property owner’s right to collect the surplus proceeds from the tax-foreclosure sale of his or her property has deep roots in Michigan common law. We also recognize this right to be “vested” such that the right is to remain free from unlawful governmental interference.

We recognize that municipalities rely heavily on their citizens to timely pay real-property taxes so that local governments have a source of revenue for their operating costs. Nothing in this opinion impedes defendants’ right to hold citizens accountable for failing to pay property taxes by taking citizens’ properties in satisfaction of their tax debts. What defendants may not do under the guise of tax collection is seize property valued far in excess of the amount owed in unpaid taxes, penalties, interest, and fees and convert that surplus into a public benefit. The purpose of taxation is to assess and collect taxes owed, not appropriate property in excess of what is owed.

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