Deep fakes are videos, images, or sounds of real individuals that have been manipulated or altered digitally. Scammers use artificial intelligence to misrepresent high-level individuals convincingly.

Real Threat

A growing wave of deep fake fraud scams has scammed millions of dollars from corporations globally. Just recently, the finance sector was hit by deep fake fraud scams.

85% of respondents interviewed by Medius said that deep fake scams pose a serious threat to the financial security of any business. Cybersecurity experts have raised alarm over widespread attacks as scammers leverage generative AI.

Scammers use deep fakes of high-ranking company officers to spread fake news. They also use them to defame brands, manipulate stock prices, or spread disinformation about corporations.

“Today’s CEOs and CFOs have large digital footprints. They have speeches, interviews and videos plastered across YouTube, LinkedIn and corporate websites. Artificial Intelligence (AI) can now use existing online audio content to create fake audios that sound like business leaders. Scammers are creating fake audio clips of CEOs and CFOs and calling the finance team asking them to pay bogus suppliers,” Ahmed Fessi, Medius Chief Transformation & Information Officer said.

High Vulnerability

Finance professionals are highly vulnerable to deep fake scams. 87% of professionals who participated in the Medius survey said they would make a payment if their CFO or CEO called them.

At least 57% of them can make independent financial transactions without seeking approval. Despite this, only 40% of professionals consider guarding their businesses against deep fakes a high priority. 33% say they’ve not been educated well about deep fakes. This is evidenced by the fact that only 5% of respondents knew about deep fake technology.

Finance professionals cannot count on their workmates to stop deep fake fraud scams. Only 36% of them are confident that their colleagues at work would identify a deep fake attempt.

Prevention

Conventional phishing attacks involve sending fraudulent emails or websites to targets. The aim is to trick people into sharing sensitive details with scammers. Attacks are also aimed at pushing victims into completing unauthorized transactions. Deep fakes blow this deception further.

They impersonate trusted officials in corporations with hyper-realistic video or audio impersonations. Despite the high vulnerability, finance professionals can prevent deep fake fraud scams.

“There are three important factors to prevent falling victim to deep fake attacks. One is education- employees should understand the threats and know how to counteract them. Second is the process. Too many businesses allow employees to make payments without the right checks and balances. Third is technology. AI is a force for good for finance professionals if deployed correctly as it can spot anomalous transactions based on large data sets,” Fessi added.

Organizations should invest in technology and safeguards to protect professionals. They should also educate them on phishing.

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Founded in 2017 by entrepreneurs Allan Carroll and Karl Jacob, the company attracted high-profile financial backers. These include Reid Hoffman, the Virgin Group, Baseline Ventures, and Mantis Ventures.

Rising Debt and Fines

The escalating financial troubles have raised questions about the leadership and future of the company. Among the seven creditors that have sued the mortgage fintech company is Wells Fargo. Collectively, AI fintech LoanSnap owes creditors a total of $2 million.

A former employee who requested anonymity for fear of retaliation said, “It’s really not hard to find numerous lawsuits and complaints, some of them from governmental agencies, with a quick Google search.”

State and federal agencies have sued the fintech startup. In 2021, the company agreed to pay $25000 to the Department of Housing and Urban Development in the US. LoanSnap was fined this amount after it failed to notify the government of significant losses in 2019.

Additionally,Loansnap AI fintech company risks losing its operating license in Connecticut after it failed to comply with mortgage regulations in the state.

Poor Governance 

The AI fintech LoanSnap has changed its finance team frequently. Within a short span of time, the company has had three Chief Finance Officers. These changes have attracted corporate scrutiny and caused instability in the company and caused investor confidence to erode.

“The current state is a result of terrible leadership, overspending on futility, and institutional investors falling for the charming facade that Karl can show. There’s no communication, no accountability. That makes people nervous,” the employee said.

Just last month, the company was evicted from its headquarters in Costa Mesa after it failed to settle close to $405,000 in rent. The landlord filed a lawsuit against the company that led to a issuance of a legal vacate order.

Even in the current situation, the company is still trying to cast a stable image. However, some investors have already raised red flag due to the legal issues and financial decline facing LoanSnap AI fintech company.

Internal Crisis 

Besides the debt and fine situation, the internal situation at the LoanSnap AI fintech is a mess. Towards the end of 2023, the company failed to meet its payroll obligations multiple times. This resulted in a significant reduction of employees, from a team of 100+ people to less than 50.

The challenges with payrolls and layoffs have affected staff morale negatively. Employees have also raised concerns about internal decision-making processes and spending habits exhibited by the company’s leadership. Extravagant spending like high-end office space and holidays have worsened LoanSnap’s financial situation.

Uncertain Prospects

The unfolding events at the AI fintech LoanSnap sued company presents a picture of the challenges that fintech startups experience as they maneuver the challenging waters of compliance and growth. The legal battles and bad reputation make the future of LoanSnap highly uncertain. Even if the company fixes its legal and financial issues, it will still take time to regain investor and employee trust.

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Ember’s tax accounting software takes this a notch higher by drawing bank transactions and categorizing them based on tax code.  With this feature, businesses can add receipts, monitor expenses, generate invoices, and perform basic accounting tasks on My Business Finances platform.
Users can view a business income and expenditure summary, tax payable, and the amount available for owner dividends. By handling these critical accounting tasks, the digital banking platform empowers business owners to make data-driven decisions and focus on growing their businesses.

HSBC UK’s Global Payments Solutions Head, Tom Wood said, My Business Finances not only automates accounting tasks but also offers greater visibility and control over finances, allowing owners to make decisions which are right for them. It also makes completing annual tax returns easier.”

On his part, Ember’s Co-Founder, Dan Hogan said, “We are thrilled to collaborate with HSBC UK on this innovative venture. Together, we are setting the stage for a future where business growth is supported by smart, seamlessly integrated financial tools.”

Embedded Finance at It’s Best

The HSBC Ember partnership places digital tax service by the fintech startup in front of hundreds of thousands of small and medium-sized clients. It’s a classic example of how fintech startups can access new distribution channels by embedding their solutions in existing products.

The partnership deal is a win-win for both parties. With this move, HSBC will be able to compete with well established accounting technology providers like QuickBooks and Sage Group.  On the other hand, embedded finance firm Ember will provide additional features like compilation of VAT returns to businesses at a fee. Leveraging its team of in-house accountants, the startup will be supporting paid-up customers with complex tax tasks like management of annual corporation tax.

The free tax accounting software version that Ember avails on HSBC’s digital banking portal will serve as a funnel for acquiring paying clients for the startup company.

Opportunity in Tax Regulation Shift

The HSBC Ember partnership comes at a time when the UK is preparing to transition to a full digital tax system. Starting in 2026, all UK businesses will be expected to maintain digital records and file quarterly reports to the government. These regulatory changes are likely to boost business interest in digital accounting software. HSBC and Ember are already positioning themselves to tap into the approximately 1.8 million market of business owners in the country.

The opportunity presented by these regulatory changes is among the key reasons embedded finance firm Ember was able to raise about $6.3 million from Shapers, Viola Fintech, and Valar Ventures.

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