Mumbai: The Reserve Bank Governor Sanjay Malhotra on Wednesday said that considering the evolving landscape of money laundering, regulators will need to continuously augment artificial intelligence (AI) and Machine Learning (ML) risk assessment framework to make appropriate system enhancements.
Addressing the Financial Action Task Force (FATF) Private Sector Collaborative Forum 2025 event here, the RBI Governor pointed out that technology has enabled greater ease of doing business, but at the same time, it has also facilitated and fostered new and very sophisticated means of money laundering and illicit financing. This makes it imperative to refine and improve risk assessment models.
He also urged the central banks to understand the latest trends and developments in the financial world that can be exploited by criminal elements. By understanding this, he said, central banks should develop rules and frameworks which detect suspicious transactions early, and take pre-emptive action.
At the same time he also had a word of caution for policymakers. “While we continue to make our financial systems safe and secure against money laundering and terrorist financing, we as policymakers need to be mindful that our measures are not overzealous and do not stifle legitimate activities and investments,” Malhotra observed.
“Therefore, we need to have laws and regulations, which with surgical precision, target only the illegitimate and the illicit, rather than use very broad and blunt tools, which unintentionally hurt even the honest,” he said.
He also highlighted the need to improve the quality of data that is received, and the need to harness the evolving technologies that are coming in, whether it is artificial intelligence or blockchain technology or machine learning.
“This will help us in improving the screening of transactions and detection of suspicious activities, thereby reducing errors, false positives, false negatives,” he added.
Malhotra further stated that the RBI will continue to work towards fulfilling the commitment to effectively implement the next phase of the G20 roadmap towards inclusive cross-border payments by 2027.
“We are all aware that a lot of work needs to be done over there. It’s only a matter of time, I think that cross-border payments will also become much easier and cost-effective. To meet the G20 objective of making cross-border payments faster, cheaper, convenient and transparent, it would be desirable to make the travel rules technology neutral,” he added.
The RBI Governor also said that regulations should not create unintended barriers to financial inclusion. “We need to be mindful of customer rights and convenience while fulfilling due diligence requirements,” he remarked.
