Examining the Role of AI in Detecting Fraudulent Activities, Managing Financial Risks, and Enhancing Decision-making in Investment Strategies
DOI:
https://doi.org/10.47067/ramss.v8i1.450Keywords:
Artificial Intelligence, Financial Risk Management, Regulatory Compliance, Fraud Detection, Internal Auditing, Machine Learning, Predictive AnalyticsAbstract
This study investigates the applicability of AI in improving financial risks, regulatory compliance, and anomalies in financial operations within the banks in the Punjab and Sindh provinces of Pakistan. It examine to what extent the newly developed technologies using AI, mainly machine learning algorithms and predictive analytics, can be of help to risk managers, compliance officers, and internal auditors to do their job properly. A quantitative methodology was adopted and relied on a sample of 160 professionals from around Punjab and Sindh, risk managers and compliance officers, and internal auditors from financial institutions. Statistical techniques in the form of regression analysis, correlation analysis, and ANOVA were applied to relate AI adoption and enhancements in risk management and sound compliance practices. The results indicate a very positive correlation in the implementation of AI tools for enhanced abilities on decisions, fraud detection, and overall risk management. The significance of AI on the reporting of compliance regulatory compliance was also statistically determined. Here, compliance officers said that they noticed an improvement both in accuracy and timeliness to fulfill their needs of regulatory compliance. The study further illustrates that the AI turned out quite handy for the internal auditors in detecting a few inconsistencies within the financial data and so, they performed quite more efficiently. Findings seem to depict a possible improvement of operational efficiencies within the financial institutions in Pakistan through the efficiency risk-free with the advent of AI. This study complements the understanding of AI in the finance industry and presents insights that are actionable for financial institutions prepared to adopt AI technologies.
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