The worst part is that it almost worked.
You then receive an email from a customer claiming that the item they ordered was damaged during shipping. It also included a photo of two broken candles.
Customers wanted free replacements, and Foord was usually fine with this.
However, something seemed off about the photo the customer provided.
“When I first saw it, I thought, ‘Oh my god, it’s so badly damaged, something really bad happened to it in transit,'” Ford told nine.com.au.
“And within seconds, the shape [candle] The shape of the bottle does not match the shape of our bottle.
“I noticed that the text on the label was jumbled.” [and] The more I looked, the more I discovered red flags. ”
Ford said the “evidence” the customer sent was clearly an AI-generated image.
Her suspicions were further reinforced by the fact that the customer asked MILKWICK to replace the two damaged candles with different scents.
Luckily, she shared her concerns with her husband, Kane, before he sent her a replacement candle.
“Initially, he didn’t think it was AI and was definitely going to move forward with it,” Ford said.
“That was very shocking, that this customer almost escaped.”
She asked the customer to send a video of the damaged order, at which point the customer became defensive and threatened to report the business, Ford alleges.
When Mr Ford told the customer he would report any fraudulent charges to Victoria Police, the customer stopped contacting him.
According to Melbourne University law professor Jeannie Patterson, this was truly an attempted fraud.
“This is actually a crime because you are trying to gain an unfair advantage,” she told nine.com.au.
“Fraud is intentionally deceiving someone, but you can’t argue that it wasn’t intentional. You’re trying to defraud a business.”
Patterson has also heard of consumers using AI to create fake receipts in an attempt to access refunds to which they are not entitled.
She described it as a type of “reverse fraud” where shoppers prey on sellers.
“We’re in a spiral of fakery and fraud. I think it’s really bad,” she added.
As a small business owner, Hood never imagined that AI-generated image fraud would become a part of her life.
This experience led her to rethink how she handles replacements for orders damaged in transit.
Currently, MILKWICK does not require customers to send damaged products back to its Victorian warehouse as this would be an additional cost to the business.
That may change as AI becomes more pervasive.
“We’ll probably have to pay to ship it back even if it’s broken, and that’s going to be an extra expense for our business,” Ford said.
“You can’t risk people just stealing from you.”
Patterson predicts that AI fraud incidents like this could force small businesses to increase prices to cover additional shipping insurance costs and fraud losses.
Businesses may also start requiring video evidence of defective or damaged items before issuing exchanges, exchanges, or refunds.
“It’s very difficult to find a way around this problem of AI fraud by customers. After all, what’s a company supposed to do if a customer says the product is broken or the product never arrived?” Patterson said.
“If you refuse to give a refund, you could be found to be breaking the law and also receive negative reviews online, which can be devastating for your business.”
She urged small business owners to learn about AI and the red flags to look out for.
Ms Ford reiterated that message in a social media video she posted, warning other Australians to be wary of this new type of scam.
It already has nearly 300,000 views on Instagram and TikTok combined.
“I just wanted to raise awareness that unfortunately there are people out there who do this,” Ford said.
“There are probably people out there who have run away in the same way and think they can run away again.”
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