Congress Targets AI Fraud with Stiff Penalties

The AI Fraud Deterrence Act represents one of the most significant congressional responses to the growing threat of AI-enabled criminal activity. Introduced by Rep. Ted Lieu (D-CA) and Rep. Neal Dunn (R-FL), the legislation specifically targets wire fraud, mail fraud, money laundering, and impersonation of federal officials when committed with AI assistance. The bill’s bipartisan nature underscores the widespread concern about AI’s potential for misuse across political lines.

Rep. Lieu emphasized the national security implications in his statement, noting that ‘AI has lowered the barrier of entry for scammers, which can have devastating effects.’ He specifically highlighted that impersonations of U.S. officials ‘can be disastrous for our national security,’ pointing to the urgent need for legislative action. The legislation adopts the 2020 National AI Initiative Act’s definition of AI while carving out important First Amendment protections for satire, parody, and other expressive uses that include clear disclosures of inauthenticity.

The legislation establishes a tiered penalty system that reflects the severity of different AI-assisted crimes. For AI-aided mail and wire fraud, perpetrators could face up to 20 years in prison and $1 million in fines, with standard penalties rising to $2 million. The most severe penalties are reserved for AI-driven bank fraud, which could draw 30-year prison sentences and $2 million fines.

AI-assisted money laundering would carry up to 20 years in prison and fines of $1 million or three times the transaction value, whichever is greater. Impersonation of federal officials using AI technology would bring three-year prison terms and $1 million penalties. Rep. Dunn noted that ‘AI is advancing at a rapid pace, and our laws have to keep pace with it,’ adding that when criminals use AI to steal identities or defraud Americans, ‘the consequences should be severe enough to match the crime.’

The legislation follows several high-profile incidents that demonstrated the real-world dangers of AI impersonation. According to the bill’s documentation, scammers used AI months earlier to breach White House Chief of Staff Susie Wiles’s cellphone, impersonating her voice in calls to senators, governors, business leaders, and other high-level contacts. The sophistication of these attacks highlighted the urgent need for updated legal frameworks.

Two months after the Wiles incident, fraudsters mimicked Secretary of State Marco Rubio’s voice in calls to three foreign ministers, a member of Congress, and a governor in what appeared to be attempts to obtain sensitive information and account access. These incidents, targeting some of the nation’s highest-ranking officials, underscored the national security implications of AI-powered impersonation and provided concrete examples of the threats the legislation aims to address.

Despite the strong legislative framework, experts warn that enforcement presents significant challenges. Mohith Agadi, co-founder of Provenance AI, an AI agent and fact-checking SaaS backed by Fact Protocol, told Decrypt that ‘the real challenge is proving in court that AI was used.’ He explained that ‘synthetic content can be difficult to attribute, and existing forensic tools are inconsistent,’ creating potential obstacles for prosecutors.

Agadi emphasized that lawmakers need to ‘pair these penalties with investments in digital forensics and provenance systems like C2PA that clearly document a content’s origin.’ Without such supporting infrastructure, he warned, we risk creating laws that are ‘conceptually strong but practically hard to enforce.’ This perspective highlights the need for complementary technological solutions alongside legislative action.

The AI Fraud Deterrence Act emerges amid broader debates about AI regulation at both state and federal levels. President Trump is reportedly weighing an executive order to dismantle state AI laws and assert federal primacy, even as more than 200 state lawmakers urge Congress to reject House Republicans’ push to fold an AI-preemption clause into the defense bill. This tension between state and federal authority adds complexity to the AI regulatory landscape.

The legislation’s introduction follows the collapse of a similar moratorium in July after a 99-1 Senate vote, with opposition having widened since. The current bill represents a more targeted approach, focusing specifically on fraud and impersonation rather than attempting broader AI regulation. As AI technology continues to evolve, this legislation may set important precedents for how lawmakers balance innovation with protection against misuse in the financial and national security sectors.