In a bid to ensure “Zero Financial Frauds” RBI has initiated AI / ML based model called MuleHunter being piloted by Reserve Bank Innovation Hub (RBIH), a subsidiary of Reserve Bank
Mumbai: Unveiling Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Indian financial sector for the first time, the Reserve Bank of India(RBI) has proposed to constitute a committee to develop a Framework for Responsible and Ethical Enablement of AI (FREE-AI) in the segment.
The central bank has also unveiled AI solutions to identify mule bank accounts – MuleHunter.
The committee for FREE-AI will comprise of experts from diverse fields and will recommend a robust, comprehensive, and adaptable AI framework for the financial sector.
The details of the committee will be notified separately.
The financial sector landscape is witnessing paradigm shifts with the advent of frontier technologies. Technologies like Artificial Intelligence (AI)/ Machine Learning (ML), tokenisation, Cloud Computing hold transformative potential for the financial sector as they can handle enormous volumes of data, automate complex processes, enhance decision-making, and bring in unprecedented efficiencies, said the RBI.
While the benefits are many, the attendant risks like algorithmic bias, explainability of decisions, data privacy, etc., are also high. To harness the benefits, it is critical to address the attendant risks early in the adoption cycle.
In August this year, the RBI had released a draft circular on managing model risks in credit to address uncertainties in AI/ML-based credit appraisal and risk management systems used by digital lenders.
AI solutions to identify mule bank accounts – MuleHunter. AI
The RBI has been taking various measures in coordination with banks and other stakeholders to prevent and mitigate digital frauds in the financial sector. These include RBI guidelines to regulated entities for strengthening cybersecurity, cyber fraud prevention and transaction monitoring. Use of money mule accounts is a common method adopted by fraudsters to channel proceeds of frauds.
The central bank is currently running a hackathon on the theme “Zero Financial Frauds” which includes a specific problem statement on mule accounts, to encourage development of innovative solutions to contain the use of mule accounts.
Another initiative in this direction is the AI / ML based model called MuleHunter being piloted by Reserve Bank Innovation Hub (RBIH), a subsidiary of Reserve Bank.
This model enables detection of mule bank accounts in an efficient manner. A pilot with two large public sector bank has yielded encouraging results.
Banks are encouraged to collaborate with RBIH to further develop the MuleHunter.AITM initiative to deal with the issue of mule bank accounts being used for committing financial frauds, said the RBI.
Meanwhile, Finance Ministry on Friday asked banks and financial institutions to use artificial intelligence tools including MuleHunterAI developed by the Reserve Bank to rein in growing financial frauds.
In a meeting chaired by Financial Services Secretary M Nagaraju, banks were asked to adopt best practices, leveraging cutting edge tools, and foster inter-bank collaboration to address mule accounts effectively.
He emphasised that proactive measures are required to be taken to protect citizens’ hard-earned money.
“Protecting citizens’ wealth is our shared responsibility,” the Department of Financial Services (DFS) said in a series of posts on X.
Banks are directed to adopt advanced technologies including artificial intelligence and machine learning solutions for real-time detection of mule accounts, it said.
“Banks were also encouraged to explore and implement http://MuleHunter.AI, an AI/ML-driven model developed by RBI, to strengthen the detection and monitoring of mule accounts,” he told representatives of I4C, RBI, NABARD and banks.
A mule account is a bank account used by criminals to launder illicit funds, often set up by unsuspecting individuals lured by promises of easy money or coerced into participation. The transfer of funds through these highly interconnected accounts makes it difficult to trace and recover the funds.
“Use of money mule accounts is a common method adopted by fraudsters to channel proceeds of frauds,” Reserve Bank of India (RBI) Governor Shaktikanta Das said.
This model enables detection of mule bank accounts in an efficient manner. A pilot with two large public sector banks has yielded encouraging results.
DFS Secretary emphasized the need for regulators and banks to work collectively in curbing digital financial frauds, it said, adding, sharing of good practices across the banking sector was highlighted to ensure a unified and effective response.
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