Role of AI in Fraud Detection: Are financial institutions using the most effective systems?
Year: 2025
Type: article
Abstract: This paper explores the use of AI in fraud detection and prevention, highlighting both its advantages and limitations. While AI strengthens fraud-fighting capabilities and delivers substantial cost savings, it also raises challenges related to model interpretability, ethical considerations, and regulatory compliance. System flaws can lead to severe penalties, reinforcing the need for ongoing human oversight. In this context, compliance officers, fraud analysts, and auditors remain essential for reviewing flagged anomalies, validating AI-driven decisions, and addressing complex or ambiguous cases. The study emphasizes that effective fraud prevention in the U.S. financial system requires a balanced integration of AI technologies with human judgment to ensure transparency, accountability, and compliance.
Source: Journal of Finance Issues
Authors: Hoje Jo, Hien Bui, Damon Moreland
Institution: Santa Clara University
Language: English
Subfield: Artificial Intelligence
Field: Computer Science
Domain: Physical Sciences
Open Access status: diamond
OpenAlex ID: W4414276404