AI-driven identity fraud costs UK economy GBP £1.8 billion yearly

Artificial intelligence is driving a marked escalation in fraudulent activity, with new figures indicating that synthetic, AI-generated identities account for 42% of identity fraud cases in the UK.

Experian and Cifas have reported a 9% rise in identity fraud over the past three years, as criminals harness advanced technology to target both businesses and consumers, particularly in the run-up to the festive season.

AI-fuelled surge

The use of AI technology to rapidly produce synthetic identities is emerging as a significant threat. Criminals are exploiting both genuine and fabricated information to create convincing fake documents and launch large-scale fraud attacks. This trend is having a direct impact on UK businesses: more than one third experienced AI-related fraud attempts in the first three months of the year.

The report finds that the festive season presents an increased risk, with card fraud rates spiking during November and December. UK households spend, on average, over GBP £3,000 in December alone, nearly a third more than in typical months, creating an environment with increased vulnerabilities for potential fraud.

Account targeting

There has been a notable rise in potentially fraudulent savings account openings, rising by 53% over the last three years. This activity is often driven by AI-created identities as criminals open accounts designed to store or move stolen or laundered money.

Account takeover incidents have seen a sharp increase. Cifas members reported over 74,000 cases in 2024-a 76% jump compared to the previous year. The figure for the first six months of 2025 has already exceeded 38,000 cases. This type of fraud, which sees criminals using stolen personal details to access bank accounts or financial products, is causing concern across the industry.

Types of attacks

Eight main threats have been identified, including AI scams, identity theft, account takeover, misuse of facility, investment scams, SIM-swap scams, social media-driven scams, and scams targeting employees. Misuse of facility-where genuine account holders use their accounts for illicit purposes such as money muling-has become the second most common fraud type recorded.

Data compiled by Cifas reveals that members reported more than 217,000 fraudulent cases to the National Fraud Database in the first half of 2025. Identity fraud alone is estimated to cost the UK economy GBP £1.8 billion a year.

Multi-layered defence

Businesses have begun implementing a multi-layered defence strategy, combining biometric and behavioural technologies to detect and prevent fraudulent activity. These approaches are seen as critical to contend with the evolving capabilities of threat actors harnessing powerful tools such as AI.

"Our work with Cifas underlines what many suspect, that UK businesses and consumers are facing an ongoing epidemic of fraud which show no signs of abating.

"Fortunately, businesses are deploying increasingly sophisticated technology to identify and prevent fraud. By deploying a multi-layered approach incorporating biometric and behavioural technology organisations can ensure their defences are fit-for-purpose." said Paul Weathersby, Chief Product Officer, Identity and Fraud, Experian UK&I.

Collaboration emphasised

Mike Haley, Chief Executive, Cifas, commented, "Fraud doesn't take a holiday - in fact, the festive season often fuels it. As we unwrap Christmas fraud, increased spending, stretched resources, and seasonal staffing can create the perfect storm for criminals to exploit vulnerabilities at scale and commit a range of crimes - from identity fraud to account takeover.

Haley continued, "Fraud may be evolving, but so is our response. We are helping organisations to reinforce internal controls, training workforces to spot and report fraud, and deploying robust prevention tools. And just like the spirit of the season, sharing is our gift to businesses and their consumers - by sharing data and intelligence across sectors, we can close the gap and keep fraud firmly off the festive menu."