NEW YORK–Deepfakes, the technology that can replicate an individual’s entire identity using artificial intelligence—are a growing and formidable fraud threat to financial institutions, but one Fed governor said any rules developed in response need to be mindful of an FI’s size.

In remarks to the Federal Reserve Bank of New York, Gov. Michael Barr said regs must consider the resource limitations of smaller institutions and need to be “right-sized.”

“In addition, we can work with core providers to understand the extent to which they are incorporating AI advancements in their products and services to help smaller banks defend against deepfakes and other emerging risks from the technology,” Barr told the New York Fed. “Last, we can also highlight research and development for cybersecurity startups and research into tools to combat deepfakes and Gen AI-based fraud.”

If You Can’t Beat ‘Em…

According to Barr, regulators themselves should also be turning to AI technologies in response to the fraud threat, including enhancing regulator ability to monitor and detect patterns of fraudulent activity at regulated institutions in real time.

 “This could help provide early warnings to affected institutions and broader industry participants, as well as to protect our own systems,” Barr stated.