Artificial Intelligence in Finance: Transforming
Services, Managing Risks, and Navigating Adoption
Challenges
Yesset Yedres
School of Engineering and Digital Sciences
Nazarbayev University
Astana, Kazakhstan
yesset.yedres@nu.edu.kz
Abstract—This project is about a study which lead to the
findings that Artificial Intelligence (AI) has had a tremendous
influence on the prevention of fraud and management of risk
in the finance industry. In connection to integrating AI and
machine learning technologies, financial institutions can substan-
tially scale up their longevity in tracking fraudulent activities and
risk management. This study aims to summarize the previous
literature and explain how the artificial intelligence of fraud
detection and financial risk management can be integrated
together. Regarding problems of deploying the AI technologies
based on ethical issues, data privacy violations and legalization of
their implementation, it is solved. The paper accomplishes this
through in-depth examination and evaluation of the literature
review and available practices. The paper strives to not only
contribute academically but to also provide a realistic view of
how AI could transform the fraud detection and risk management
procedures. It provides the meanings of future explorations in
research directions and practical applications strategies as well,
indicating that interdisciplinary approaches to these activities
should be efficient when integrating AI to the financial industry.
Index Terms—artificial intelligence, fraud detection, risk man-
agement, financial sector, machine learning, data privacy, regu-
latory frameworks
I. I NTRODUCTION
The domain of AI-powered finances has been the catalyst
for the transition to more advanced and effective financial
fraud detection & risk management mechanisms. As digital
payment evolves towards its dominance, criminals become
glad of the opportunity to use modern technology skills to
enable financial fraud and the situation gets complicated from
risk management point of view. AI and intelligent systems
become the revolutionizing elements of the financial journey.
First and foremost, they provide unprecedented accuracy and
effectiveness in detecting abnormalities and fraud, as well as
manage risks very efficiently (Giudici, 2018).
The aim of this paper is to explain the impact of AI
technologies to fortify finance industry defense mechanisms
against fraud and improve risk management practices. It uses
the existing research, like Giudici’s (2018) examination of
how AI plays a crucial role in the Fintech risk management,
and Soltani et al. (2023) in-depth discussion on financial
statement fraud detection and AI, to highlight the potential of
AI transforming the functions. Also the paper looks into the
regulatory and ethical challenges of AI application in finance
pointing the issue of imperative regulations rules to govern
application of AI in the change of how we perceive the word
financial.
AI integration plays an important role in eliminating fraud
as well as in security measures like the ones that are used in
ensuring stability and integrity in the financial system (Naim,
2022). Yet, AI technologies, no matter how advanced they are,
are not the panacea for all the problems they bring. Ethical
challenges, data risk and privacy protection still surmount as
the greatest problems that should be treated effectively (Truby,
et al. 2020, Yuan & Wu, 2021).
AI utilization will be mitigated through a comprehensive
literature review and a supporting case study to enable a more
skilled understanding of the role AI plays in improving fraud
detection and risk management in the sector, demarketing
industry. Through this analysis, the research exercise also
adds to the continuing debate on technology progress in the
financial service business and presents the fully operational,
ethic and forensic aspects of AI integration.
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