In an era of accelerating digitalization, the financial services industry is facing another bout of technologically advanced threats with the power of artificial intelligence. Of these, the phenomenon of deepfake technology and synthetic identity fraud has become the most critical issue, leading to the loss of faith in online identity systems and the usefulness of financial operations. It is weaponizing deepfakes, or highly realistic yet artificially generated sound, video, and image forgeries, to find a way around biometric authentication and to plough customer service systems (as well as bypassing TOD on their phones, etc.). Parallel to this process, synthetic identity fraud, during which criminals are building fictitious characters with both real and falsified information, is currently one of the most actively developing areas of criminal activity in the financial sector, leveraging the weaknesses in credit bureaus, customer onboarding, and digital wallets. This chapter addresses the structure and development of such AI-driven threats with references to the recent international case studies, technological innovation in generative AI (e.g., GANs, voice cloning), and the typology of frauds that are recorded. It emphasises the industrialisation of these tools to enable scaling using cybercrime-as-a-service providers in the dark web. Discussion is further applied to control regulation gaps, the shortcomings of the original KYC/AML solutions, and a growing obsolescence of the static identity markers. The chapter, in turn, presents the strategic defence construct based on layer, adaptive, and AI-enhanced risk control. These are liveness detection, behavioural biometrics, explainable AI to detect anomalies, decentralised identity structures, and cross-institutional intelligence sharing. The discussion also focuses on agile regulatory innovation, cross-border collaboration, and responsible AI regulation as these areas should remain ahead of current threats.