AI tools are increasingly being deployed to detect fraud and improve compliance. Sophie Luskin, a communications fellow at the law firm Kohn, Kohn & Colapinto, explores what happens when those same algorithms are turned inward.
As the implementation of artificial intelligence (AI) compliance and fraud detection algorithms within corporations and financial institutions continues to grow, it is crucial to consider how this technology has a twofold effect.
It’s a classic double-edged sword: In the right hands, the technology can help detect fraud and bolster compliance, but in the wrong hands, it can snuff out would-be whistleblowers and weaken accountability mechanisms.
Algorithms are already pervasive in our legal and governmental systems: the SEC, a champion of whistleblowers, employs these very compliance algorithms to detect trading misconduct and determine whether a legal violation has taken place.
There are two major downsides to the implementation of compliance algorithms that experts foresee: Institutions avoiding culpability and tracking whistleblowers. AI can uncover fraud but cannot guarantee the proper reporting of it. This same technology can be used against employees to monitor and detect signs of whistleblowing.
Strengths of AI compliance systems
AI excels at analyzing vast amounts of…
