AI Deepfake Fraud Raises Liability Stakes for Banks and Business, Published in Bloomberg Law

In a news mention published on September 30 in Bloomberg Law, Segal McCambridge shareholder Joseph L. Kish and associate Kathryn J. Lapin examine how AI-generated deepfake schemes complicate the legal analysis of payment fraud, bank liability, and commercially reasonable security procedures. The authors pose practical questions businesses and financial institutions should consider as impersonation tactics become increasingly convincing, making traditional authentication controls less secure. 

“Deepfakes sharpen the distinction because authentication may confirm who operated the account, but not the executive, vendor, or relative who appeared on a call and prompted the payment. A transfer therefore can satisfy every account-level security measure even though the decision to send it was induced by a fabricated identity,” Kish and Lapin explain. 

Commercial payment disputes often turn on Article 4A of the Uniform Commercial Code, account agreements, agreed security procedures, and whether a party had a duty and practical opportunity to detect suspicious activity. Unusual transfer amounts, new payees, rapid transfers, and activity outside an account’s normal history may warrant closer review even where valid credentials were used. 

“Deepfakes may change what reasonable verification requires, but their use doesn’t establish liability on its own,” Kish and Lapin write. “Liability will depend on whether any party had both a duty and a practical opportunity to detect the deception, and whether doing so would have prevented the loss.”  

Read the article in full; click here (subscriber-based).