RBI to introduce real-time AI-powered systems to check cyber fraud

Reserve Bank of India (RBI) Two people familiar with the matter said they are working on an artificial intelligence-supported solution that will warn individuals against financial frauds in real time.

Under the plan, individual banks will tap into the central bank data warehouse, which holds information about various types of fraud and their perpetrators, and an artificial intelligence-based alert system will flag suspicious transactions about to be made.

“The system will use artificial intelligence to collect and analyze data on potential scams, identify high-risk platforms and notify users during transactions to reduce cyber fraud risks,” one of the two people cited above said on condition of anonymity.

“While cyber fraud remains under control, the RBI sees this proactive approach as vital in resolving emerging challenges in the digital finance space,” he said, adding that the central bank will also try to anticipate future challenges.

Of course, the Reserve Bank of India Innovation Center (RBIH), an RBI subsidiary, has already developed MuleHunter AI, an artificial intelligence and machine learning (AI/ML) model that will help banks and financial institutions detect so-called mule accounts being used. by scammers. The new system will warn users and protect digital transactions.

Work in progress

The RBI has been trying to create an AI-powered fraud information system to detect and prevent cyber fraud for some time now. An expert group constituted by the RBI on cyber fraud has offered its recommendations, which include implementing artificial intelligence that can learn from past frauds to identify high-risk transactions.

“The system aims to make it harder for fake funds to be converted into cash, while improving the preparedness of banks and payment gateways to detect possible fraud,” the second person cited above said.

“While current fraud rates remain low at approximately one in 114,000 transactions, there is an increase in the volume and average size of cyber frauds. So this is all part of plans to raise public awareness to help prevent victimization,” the person said. on condition of anonymity.

Besides creating multiple anti-cyber fraud groups, the central bank set up the Cyber ​​Security and IT Examination (CSITE) cell under the Banking Supervision Agency in 2015 and created a Fraud Monitoring Cell, which has published a directory of officials in banks. and financial institutions responsible for fraud reporting.

Updated guidelines

The central bank has also updated guidelines for banks, drawing on views from the Indian Cyber ​​Crime Coordination Centre, a government body dedicated to combating cyber fraud.

Spokespersons for the RBI and the finance ministry did not respond to emailed questions.

According to the 2024 Deloitte-NASCIO Cybersecurity Survey, cybersecurity is now a top priority for governments, regulators and companies as the digital landscape expands with increasing amounts of online personal, health and financial data, as well as critical infrastructure such as transportation and water. and power systems integrated with online components lead to increasing security vulnerabilities.

The report, published on September 30, said governments and regulators are increasingly recognizing that robust information security is essential for the reliable operation of essential government services.

Growing attack surface

“The attack surface is growing. More information is flowing online as well as through the Internet of Things. More locations than ever have servers holding the public’s health, financial and more personal data. More critical infrastructure is being integrated with online operational components,” the report said .

“All of this creates a greater number of areas of vulnerability, and government officials recognize information security as the basis for the effective functioning of essential government services.” he added.

According to the RBI annual report published in May, the number of frauds in the banking sector increased by nearly 300% in the financial year compared to the last two years. The report stated that 67% of the fraud cases reported in FY24 came from private sector banks, while 75% of the total amount of fraud was reported by public sector banks.

The percentage of fraud amount reported by private lenders was 22.8% in FY24.

According to the RBI report, overall online fraud cases increased by 708% to 29,082 in FY23 and FY24.