Synopsis
In a recent address, RBI Governor Sanjay Malhotra emphasized the importance of enhancing AI and ML frameworks to combat evolving money laundering tactics, ensuring regulations remain effective without hindering legitimate business activities.Key Takeaways
- AI and ML are crucial for evolving risk assessments.
- Technology simplifies business but also facilitates money laundering.
- Central banks must recognize and respond to new financial trends.
- Policymakers should avoid stifling legitimate activities.
- Improving data quality and leveraging emerging technologies is vital.
Mumbai, March 26 (NationPress) The Governor of the Reserve Bank, Sanjay Malhotra, stated on Wednesday that in light of the changing dynamics surrounding money laundering, it is essential for regulators to continually enhance their artificial intelligence (AI) and Machine Learning (ML) risk assessment frameworks to implement necessary system improvements.
While speaking at the Financial Action Task Force (FATF) Private Sector Collaborative Forum 2025 event, the RBI Governor emphasized that while technology has simplified business operations, it has also given rise to sophisticated methods of money laundering and illicit financing. Therefore, refining and advancing risk assessment models is crucial.
He encouraged central banks to keep abreast of the latest trends and developments in the financial sector that could be exploited by criminals. By doing so, he stated, central banks should formulate rules and frameworks that can identify suspicious transactions promptly and take proactive measures.
Additionally, he cautioned policymakers, saying, “As we strive to protect our financial systems from money laundering and terrorist financing, we must ensure that our actions do not impede legitimate activities and investments.”
“Thus, we must establish laws and regulations that precisely target only the illegitimate and the illicit, rather than employing broad and imprecise measures that could inadvertently harm honest individuals,” he added.
He also stressed the importance of enhancing the quality of data received and the necessity to leverage emerging technologies such as artificial intelligence, blockchain technology, and machine learning.
“This approach will enhance our ability to screen transactions and identify suspicious activities, thus minimizing errors, false positives, and false negatives,” he mentioned.
Malhotra further indicated that the RBI will persist in its efforts to fulfill the commitment to effectively execute the next phase of the G20 roadmap concerning inclusive cross-border payments by 2027.
“We all recognize that significant work remains. I believe it is merely a matter of time before cross-border payments become easier and more cost-effective. Achieving the G20 goal of making cross-border payments faster, cheaper, more convenient, and transparent calls for travel rules that are technology-neutral,” he remarked.
The RBI Governor also pointed out that regulations should not unintentionally obstruct financial inclusion. “We must consider customer rights and convenience while adhering to due diligence requirements,” he concluded.
