AI Deepfake Tool Raises Concerns Over Crypto KYC Protocols

• AI-powered ProKYC generates fake IDs and videos, bypassing KYC checks on crypto exchanges.
• Cato Networks reports that ProKYC targets exchanges using facial recognition.
• Criminals use ProKYC’s deepfake tech to bypass KYC systems with AI-generated identities.

A new AI-powered tool, ProKYC, has raised concerns over its ability to bypass high-level Know Your Customer (KYC) protocols on cryptocurrency exchanges. A report from Cato Networks on October 9 revealed that this tool represents a major advancement in crypto fraud. Using artificial intelligence, ProKYC enables criminals to create fake identities, posing a serious threat to KYC systems.

ProKYC Targets Crypto Exchanges 

Traditional identity fraud often involved buying forged documents on the dark web. However, ProKYC takes a different approach. The tool allows fraudsters to create entirely new identities. According to Cato Networks, the AI tool is designed to target crypto exchanges and financial institutions. These organizations use facial recognition technology to verify the identity of new users. This process requires uploading a government-issued ID, such as a passport or driver’s license, and matching it with a live webcam image.

ProKYC manages to bypass these checks by generating both a fake identity and a deepfake video. This allows criminals to get around the facial recognition software. Cato Networks stressed that this method introduces a new level of sophistication to crypto fraud.

Deepfake Technology Passes KYC Systems

In a demonstration video, ProKYC showed how it could generate fake documents and deepfake images. The video showed an AI-generated face placed on an Australian passport template. The tool then created a deepfake video of the same face. This video and the image were used to pass KYC checks at Bybit, a Dubai-based crypto exchange.

This example highlights the risk faced by crypto exchanges. Their biometric verification systems are being fooled by deepfake technology. As a result, these systems struggle to differentiate between real users and impersonators.

Security Concerns Grow 

ProKYC with AI driven features has brought new security issues to the fore within the cryptocurrency markets. This growing threat points to the fact that security should be stepped up. It is still early days for ProKYC and similar tools; however, crypto exchanges and financial companies may have to redesign their existing strategies. These companies run the risk of staying vulnerable to AI enabled fraud if KYC standards are not updated.

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