Deepfakes and Identity Verification: What’s at Risk

Key Takeaways:

Deepfakes pose a serious threat to identity verification by generating hyper-realistic, AI-generated media that can bypass even advanced biometric security measures. As these synthetic forgeries become more convincing, it’s getting harder for systems to tell real identities apart from fake ones—making it easier for bad actors to exploit tools like facial recognition and Know Your Customer (KYC) protocols.

According to Sensity’s annual report, more than 2,000 tools exist globally for creating face swaps, lip-syncs, and AI avatars. On top of that, over 10,000 AI image generation tools are in circulation—and 47 are specifically designed to bypass KYC processes. In underground markets, pre-made fake images and videos to trick KYC systems are being sold for as little as $5 to $20. One platform, OnlyFake, advertises that it uses “neural networks” to generate fake ID photos that appear strikingly real for just $15.

For financial institutions, the stakes are high. Deepfakes can lead to major losses, identity theft, and reputational damage. Criminals use them to trick verification systems, impersonate real people, and slip through identity checks unnoticed.

As digital identity becomes central to everything from banking to online access, verifying someone’s identity accurately is more important than ever. But with deepfake tools getting more sophisticated and widely available, organizations need to strengthen their defenses and invest in technologies built to detect and prevent synthetic fraud.

Weak Points in KYC and eKYC Deepfakes Exploit

Know Your Customer (KYC) is a critical process for businesses—especially in the financial sector—to verify identities and prevent crimes like money laundering, fraud, and identity theft. But despite its importance, KYC fraud is on the rise. Criminals are increasingly finding ways to exploit gaps in both traditional and digital verification systems to impersonate users and gain unauthorized access.

Traditional KYC involves collecting and verifying personal information, such as names, addresses, and government-issued IDs (like passports or driver’s licenses). It also includes risk assessments, ongoing monitoring, and enhanced due diligence to meet regulatory requirements. However, these methods often rely on physical documents and in-person checks. As a result, it can be slow, prone to human error, and easier for fraudsters to manipulate. This approach also creates access barriers for people in remote or underserved areas, making the process inefficient and more vulnerable to fraud.

To address these challenges, many institutions have turned to electronic KYC (eKYC), which uses digital tools like optical character recognition (OCR) and artificial intelligence (AI) to verify identity documents. Biometric checks—such as facial recognition or fingerprint scanning—are often added for extra security. But even these advanced systems aren’t foolproof.

Deepfakes and manipulated biometric data are now being used to trick AI-powered verification tools. Fraudsters can spoof facial recognition or fake ID documents well enough to bypass checks entirely. As eKYC becomes more common, these vulnerabilities are becoming easier to exploit—putting institutions at risk of financial loss, regulatory penalties, and reputational damage.

How eKYC Verification Works

Electronic Know Your Customer (eKYC) processes use digital tools to streamline and strengthen identity verification. Here’s how a typical eKYC process works:

• ID Verification: The customer submits a government-issued ID (like a passport or driver’s license), which is scanned or photographed. Optical Character Recognition (OCR) technology extracts key details, which are then cross-checked against trusted databases to confirm authenticity.
• Face Matching: Next, the system compares the person’s face to the photo on the submitted ID. This often involves taking a real-time selfie—sometimes while holding the ID—to ensure a match using facial recognition software.
• Liveness Detection: To confirm that the user is physically present and not using a static image or video, liveness checks are performed. These might involve simple prompts like blinking, smiling, or turning the head. The goal is to detect signs of life and rule out deepfake or spoofing attempts.

How Deepfakes Bypass eKYC Verification

Despite these safeguards, deepfakes are becoming a serious threat to eKYC systems. With the help of AI, fraudsters can now generate fake biometric data that closely mimics real users, tricking even advanced verification tools.

As deepfake technology evolves, it’s becoming harder to tell real from fake. Criminals are:

• Creating forged government-issued IDs that appear legitimate.
• Altering their selfies to match stolen or fake IDs.
• Using facial manipulation tools to fool face-matching software.
• Exploiting liveness detection by simulating natural movements like blinking or smiling—or by using pre-recorded videos that mimic these actions.

According to Onfido, biometric fraud attempts using deepfakes rose 31x in 2023 compared to previous years, highlighting how rapidly the threat is growing.

Examples of Deepfakes Used for Identity Fraud

Criminals are using a range of deepfake techniques to commit identity fraud. Here are some of the most common types:

• Face Swaps: Fraudsters use AI to replace their face with someone else’s in a video or image—often matching a stolen ID photo. This tactic is designed to fool facial recognition systems. In more advanced cases, they blend features from different faces to create entirely synthetic identities. This technique is sometimes paired with voice cloning and lip-syncing, making it seem like the person is speaking in real-time—even when they’re not.
• Fully Generated Faces: Some tools can generate realistic photos of people who don’t actually exist. These AI-generated faces are often used to create entirely new, synthetic identities that pass digital ID checks.
• Voice Cloning: AI-generated voice deepfakes can replicate a person’s speech patterns and tone with startling accuracy. These are used in audio-based verification or social engineering scams to impersonate individuals.
• Synthetic Identities: This technique involves combining real and fake personal data to create a new identity. These identities are then used to open accounts, apply for loans, or conduct fraud—making them harder to detect with traditional KYC checks.

How Verifiable Credentials Help Prevent Deepfake Identity Fraud

Verifiable credentials (VCs) are tamper-proof, cryptographically signed digital credentials that allow individuals to prove who they are—without revealing more than necessary. Unlike traditional identity systems that rely on static documents and centralized databases, VCs offer a more secure, privacy-first solution that’s harder for deepfakes to exploit.

Here’s how VCs can help stop deepfake-driven identity fraud:

• Cryptographic Signatures: Trusted issuers sign each VC using cryptographic keys. If anyone tries to alter the credential—such as inserting fake identity data—the signature immediately breaks. Verifiers run a cryptographic check to confirm authenticity and block forgery attempts.
• Tamper-Evident Records: Systems record many VCs on blockchains or distributed ledgers. Any tampering becomes visible and traceable, preserving the integrity and history of each credential.
• Selective Disclosure: Users share only the information needed—like confirming age or residency—without exposing other personal details. Selective disclosure limits what fraudsters can steal or mimic using deepfakes.
• Decentralized Control: Users store credentials on their own devices, not in vulnerable centralized databases. This gives individuals full control over when and where they share their information.
• Spoof-Proof Verification: VCs cryptographically bind to the individual they’re issued to. Even if a deepfake is presented, the system won’t validate the credential unless it pairs with the rightful holder’s private keys.
• Privacy and Security by Design: VCs minimize data exposure during verification. This reduces the chance that attackers can gather enough personal details to generate believable deepfakes.
• Global Interoperability: Open standards make VCs verifiable across platforms, industries, and borders—strengthening identity verification systems worldwide.

The Future of Identity Verification With Verifiable Credentials 

As deepfake technology continues to advance, verifiable credentials (VCs) will play an important role in Know Your Customer (KYC) and identity verification. VCs offer a proactive, tamper-resistant solution to the growing risks posed by synthetic media, helping ensure identity verification systems remain secure and trustworthy.

1. Widespread Adoption

With deepfake attacks on the rise, financial institutions, governments, and organizations are expected to accelerate adoption of VCs. These credentials are highly scalable and suitable across industries and jurisdictions. Thanks to their cryptographic foundations, VCs can adapt to evolving threats while maintaining strong security standards.

2. Integration with Digital Identity Ecosystems

VCs are becoming a core building block of digital identity systems—especially as decentralized identity models gain traction. Their integration enables individuals to manage and verify their identities across multiple platforms securely, reducing the risk of fraud driven by deepfakes or synthetic identities.

3. Enhanced Security Protocols

To stay ahead of emerging threats, VC security protocols will continue to evolve. Advances in cryptography, blockchain, and AI-powered fraud detection will further strengthen KYC and identity workflows, creating resilient systems that are far more difficult for deepfakes to exploit.

Conclusion

Identity.com

Identity.com, as a future-oriented organization, is helping many businesses by giving their customers a hassle-free identity verification process. Our organization envisions a user-centric internet where individuals maintain control over their data. This commitment drives Identity.com to actively contribute to this future through innovative identity management systems and protocols.

As members of the World Wide Web Consortium (W3C), we uphold the standards for the World Wide Web and work towards a more secure and user-friendly online experience. Identity.com is an open-source ecosystem providing access to on-chain and secure identity verification. Our solutions improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes. Please get in touch for more information about how we can help you with identity verification and general KYC processes.