As we continue to navigate the digital era, Artificial Intelligence (AI) technology advancements have impacted many industries, most notably finance and banking. However, with the development of AI comes a problem: AI is making financial fraud harder to spot.

The repercussions of AI-driven fraud extend beyond the immediate monetary losses. There are substantial costs related to reputation, customer trust, and regulatory compliance. Trust-based business relationships can be eroded due to these fraud incidents, leading to indirect losses that result in direct financial losses.

Traditionally, fraud has been fought using standard detection systems and manual fraud analysis. However, traditional approaches to combat fraud must be revised as fraudsters become more sophisticated, leveraging AI to perpetrate malicious deeds. They have ushered in an era of "intelligent fraud," which is now more complex to detect and prevent.

This escalating sophistication of financial fraud exemplifies a "moving-target defense" that the finance and banking sectors must continue to implement. Fraudsters relentlessly adapt their tactics, forcing businesses and banks to continually adjust their fraud detection models, which, in turn, slows down the detection process, allowing fraudsters more time to prepare their schemes.

Machine learning (ML), a subset of AI, is a critical feature that fuels this complexity. Fraudsters deploy machine learning algorithms to understand and exploit patterns in data, facilitating the creation of new fraud techniques. Consequently, while financial institutions race to incorporate AI to help prevent fraud, online fraudsters use these same systems to accomplish their schemes at an alarming rate, making financial fraud harder to spot.

Another harmful aspect of AI is the concept of deepfakes, a sophisticated AI application that creates counterfeit audio and videos that seem real. Hackers and fraudsters can now manipulate data to validate fraudulent transactions. They use these deepfakes to imitate voices on the phone or foster fake video conferences, duping authorized personnel to validate transactions illegitimately.

Despite the growing complexity of spotting financial fraud, a silver lining exists. AI and machine learning technologies are diverse and flexible enough to be used by financial institutions to combat these advancing fraud techniques. While AI has increased the difficulty of spotting financial fraud, continuous deployment of proper AI measures, increased collaboration, and the evolution of fraud detection models can tilt the scales in favor of financial operations.