As Americans lose billions of dollars to digital scams, startups turn to AI for solutions

It was a scam you may have heard of.

The caller claimed to be a relative in trouble — in this case, a grandson who was in a car accident in Cuba and needed $34,000 for hospital bills and to get out of jail.

Brian Roundtree’s parents wanted to help their purported grandson. They wired the funds. Family members caught wind of the scam and tried to claw back the transaction, but it was too late.

“My parents, they didn’t report any of their losses just out of embarrassment,” said Roundtree, a Seattle startup vet working on a new company to help combat fraud.

Reported losses from similar scams and frauds totaled $10 billion last year, according to the U.S. Federal Trade Commission. The numbers keep climbing and in fact could be more than 10-times higher, experts say, as many victims keep mum about the crimes. A report out this month found that 1 in 10 U.S. adults surveyed had lost money in a digital scam or cyber attack.

“We are in the midst of a fraud crisis in this country,” said Kathy Stokes, director of Fraud Prevention Programs at AARP.

And it’s almost certain to get worse as artificial intelligence and generative AI technologies make it easier to impersonate loved ones in need, financial institutions or tech support companies seeking money or personal information.

“They have the tactic. And the tactic is a contact out of the blue that puts you into heightened state and contains urgency,” Stokes said. “Our brains allow the bypassing of logic when we’re thrown into fight or flight mode.”

Intelligent, rational people feel panicked and make decisions they otherwise might not. While anyone can be a target, Stokes said, older adults are often victimized as they’re more likely to answer their phone, are alone and therefore more persuadable, and have a bigger bank balance for raiding.

The problem spans the globe, Stokes said.

Law enforcement and policy makers are starting to pay more attention, and a nonprofit is launching soon that will help track victims to identify repeat criminals and enable prosecutions. Public education campaigns continue trying to raise awareness.

And a growing number of startups are developing new tech tools to protect people and prevent the crimes.

Roundtree, a serial entrepreneur from Seattle, is one of those founders. After his parents were robbed, Roundtree and Kevin Allan last year co-founded aiShield, a startup using generative AI to intercept fraudulent calls to cell phones, and to detect calls revealing sensitive information. They’re aiming the service at older adults.

AiShield will screen incoming calls, asking an unknown caller to identify themselves and say why they’re calling. That information is relayed to the customer, who can decide whether to pick up.

But scammers also contact victims by email or text and evade detection. They’ll direct the person to call a number to provide credit card or bank information.

So aiShield will also monitor outgoing calls, listening for instructions for money transfers and the like. If red-flag phrases are detected, the service steps in, using generative AI to warn the customer and tell the caller the conversation is being monitored.

The startup plans to function as a mobile virtual network operator, or MVNO, which uses the cell network of a carrier such as Verizon or T-Mobile, but provides its own service.

Roundtree and Allan previously co-founded autoGraph, a startup that allowed consumers to customize their profile for advertisers. They also worked together at SNAPin Software, telecom software company that Roundtree founded and was acquired by Nuance for roughly $180 million in 2008. Nuance was later acquired by Microsoft.

AiShield has built proof-of-concept technology. It has four employees and is self-funded, but looking to raise capital from angel investors. Within about 12 months Roundtree hopes to have a product ready for customers try out.

“Everyone knows somebody that has been scammed,” Roundtree said. “It’s a personal mission, just wanting to make a difference.”

There are many anti-fraud companies serving corporate customers, though fewer focus on consumers. Those include targeting scam prevention and identity-theft protection companies such as Aura, Robokiller, and fellow Seattle startup Hiya, among others.

Stokes is hopeful that awareness and concern have finally reached a point where people aren’t blaming the victims and real progress is coming. The White House this year held two roundtables with the National Security Council to address the issue, she said, which needs to be treated like other property and violent crimes.

“This is a huge problem. It is a crime,” Stokes said. “Peoples’ lives are being destroyed.”