RBI Governor Highlights AI as a Crucial Tool in Combating Money Laundering

Mumbai: The Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, emphasized the role of Artificial Intelligence (AI) and Machine Learning (ML) in strengthening risk assessment frameworks to tackle evolving money laundering threats.

Speaking at the Financial Action Task Force (FATF) Private Sector Collaborative Forum 2025, held in Mumbai, he underscored the need for continuous technological enhancement to stay ahead of financial criminals.

AI and ML: Transforming Risk Assessment in Banking

Malhotra pointed out that while technology has significantly improved financial services and ease of doing business, it has also paved the way for highly sophisticated methods of money laundering and illicit financial activities.

He stressed that financial regulators and central banks must refine their risk models and deploy AI-driven solutions to detect suspicious transactions more efficiently.

“With the rapid advancements in AI and ML, regulators must adopt these technologies to improve the screening of transactions, minimize errors, and reduce false positives and negatives,” Malhotra stated.

He also called for improved data quality, stating that an effective risk mitigation strategy depends on the ability to process and analyze vast amounts of financial data in real time.

Balancing Security with Business Growth

While advocating for stringent anti-money laundering (AML) measures, Malhotra cautioned policymakers against implementing overly restrictive regulations that could hinder legitimate business operations and investment opportunities.

“While we continue to make our financial systems secure against money laundering and terrorist financing, our regulatory approach should be precise and targeted. We must avoid broad, blunt tools that may inadvertently affect genuine financial transactions,” he noted.

Harnessing Blockchain and Emerging Technologies

Beyond AI and ML, the RBI Governor highlighted the potential of blockchain technology in enhancing transparency and security within the financial ecosystem. He stressed that emerging technologies could provide innovative solutions to track and trace financial transactions, thus improving regulatory compliance and fraud detection.

“Leveraging blockchain technology alongside AI-powered analytics can significantly strengthen our ability to identify illicit financial activities while ensuring minimal disruption to legitimate financial services,” he explained.

Enhancing Cross-Border Payments and Financial Inclusion

Malhotra reaffirmed the RBI’s commitment to implementing the next phase of the G20 roadmap for inclusive cross-border payments by 2027. He acknowledged the existing challenges in international remittances and emphasized that new-age technologies could play a pivotal role in making cross-border payments faster, cost-effective, and more transparent.

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“To meet the G20 objective of streamlining global payments, it is essential to adopt technology-neutral regulations. This will prevent unintended barriers while maintaining stringent security measures,” he remarked.

Additionally, he stressed the importance of ensuring that regulations do not impede financial inclusion efforts. He urged policymakers to consider customer rights and ease of access while implementing stringent due diligence measures.

The Way Forward

Malhotra concluded his address by reinforcing RBI’s commitment to fostering an innovative, secure, and inclusive financial ecosystem. He expressed confidence that, with the right technological interventions, the banking sector can effectively combat money laundering while promoting economic growth and digital transformation.

As financial crime continues to evolve, the integration of AI, blockchain, and advanced analytics is expected to play a crucial role in safeguarding the integrity of global financial systems.