By Thomas Berndorfer, CEO of Connecting Software
In early 2026 the Australian banking sector was rocked by a massive scandal – fraudsters had managed to secure billions in inflated loans based on AI manipulated documents. In many cases fraudsters took what was at one stage a legitimate income statement, then used AI tools to inflate certain values without detection. Fraudsters were able to secure large loans even though banks in many cases were using advanced AI tools to screen important documents.
Given that creating fabricated documents from scratch can often lead to mistakes, it has proven much easier for fraudsters to use already approved material and alter it slightly. Inscribe’s latest State of Document Fraud report found that roughly 1 in 16 of documents it processed showed signs of “manipulation, fabrication, or misrepresentation”. A study by the Brazillian branch of Experian found that out of 104.3 million transactions it processed, 3% were scams based on the falsification of an existing document.
These kinds of frauds show something of a counterintuitive truth, that sometimes genuine documents when altered just slightly, can be much more dangerous than entirely false ones, and much harder to spot. This is an increasingly important vector for fraud.
Critical documents like passports and other forms of ID often have advanced built-in checks to make sure biometric data is matched with identity codes, making manipulation of these documents difficult – but an increasing amount of the documents we use to verify our identity, such as pay stubs, housing contracts and income statements can be frighteningly easy to change subtly.
As AI grows more powerful, these scams will grow even more threatening. In these instances, and more, it is vitally important for businesses and organizations to be able to verify what is an original document that has been unchanged since its creation. This is an instance where blockchain could add significant layers of security to an ID system if it could be better integrated.
How blockchain for verification works
The blockchain is a publicly available cryptographic ledger that stores data recorded across “blocks” and is distributed across a wide, decentralized network. This means that anything stored on the blockchain is impossible to change, given that an attacker would need to change data stored on millions of devices worldwide near-simultaneously. This makes the blockchain an ideal technology for storing records that need to be easily verifiable and not targetable by cybercriminals.
This has important ramifications for ID technology. Using current technology, Governments, ID issuers, and even private organizations entering into a contract, can use blockchain based solutions to associate that digital file with a cryptographic hash, otherwise known “blockchain seal”. Having this hash will ensure that if any part of the document is changed, any subsequent verification attempts will show a different hash – immediately alerting authorities that the document has been altered or manipulated.
Critically, this has the benefit of ensuring third-party verifiability of any digital ID document, while also keeping the privacy of sensitive data – only the hash itself is stored on the blockchain.
There are limitations to this technology – for one thing, it requires that the issuer has “sealed” the document at the point of issue to ensure it can be verified against the authentic version. Secondly, this kind of technology does not distinguish between fairly innocuous changes like file name, and more major ones, and cannot yet identify which parts of the document have been changed. It therefore cannot be the only line of defense against manipulation.
Why this is important
Blockchain based ID technology is a long way from becoming ubiquitous, but there have been promising real world applications of the technology around the world.
Innovation City in the UAE has recently introduced a program to establish blockchain verifiable ID’s, with the idea that this kind of verification is not only more secure from manipulation, but easier for AI agents to parse, making it easier for individuals and businesses to access services run by AI. The directors of the project say that blockchain backed IDs will vastly speed up verification from months to moments.
The EU has also proposed using blockchain to better manage the IDs of asylum seekers. Blockchain will serve as the basis for its ESBI system for digital wallets – which will hold all of a particular citizens vital ID documents in a way much more resistant to fraud.
In an age of powerful AI editing, the digital integrity of biometric IDs will be under constant threat. It will become increasingly difficult to do high-level business with other people and organizations if much of the data we use to identify others can no longer be trusted. When original authenticated documents are later manipulated, it opens the risk of significant breaches, fraud and crime.
The advancement of AI and document fraud demands a better response – we need more advanced layers of protection than manual database cross checks and AI analysis. The blockchain, although limited in some ways, provides an ability to have a verifiable check on post-issue manipulation.
In the past, trust was about knowing where data came from. Increasingly, it will be about proving it hasn’t changed since. Blockchain has its faults, but it has the potential to be a gamechanger in restoring the necessary trust in our systems and preventing fraud.
About the author
Thomas Berndorfer is CEO of Connecting Software. For more than 22 years he has spearheaded the company’s delivery of compliant and cybersecure B2B solutions. He also serves as the Honorary Consul of Austria in Madeira and the Ambassador for Cybersecurity for SME Connect’s Digital Tools Programme.
Article Topics
biometrics | blockchain | Connecting Software | digital trust | fraud prevention
