Can AI wrongly flag legitimate transactions as ‘suspicious’? RBI flags key concerns in latest report

In its latest report, the Reserve Bank of India (RBI) has flagged some concerns relating to the impact of artificial intelligence on the world of finance. The report says that automation can potentially amplify faults across high-volume transactions.

For example, an AI-powered fraud detection system that incorrectly flags legitimate transactions as suspicious or fails to detect actual fraud due to model drift can cause financial losses and reputational damage, as mentioned in RBI’s FREE-AI Committee Report, Framework for Responsible and Ethical Enablement of Artificial Intelligence.