Integrating Artificial Intelligence and Blockchain for Assessing the Financial Risk of Fraud in Banking Sector
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Abstract
Purpose: This paper investigates the integration of Artificial Intelligence (AI) and Blockchain technology in assessing and mitigating financial fraud risks within the banking sector. It aims to explore how these technologies enhance the efficiency, transparency, and security of banking operations while reducing cyber threats and operational vulnerabilities.
Design/Methodology/Approach: A mixed-method research design was adopted, combining exploratory and analytical approaches. The study reviews extensive literature and incorporates a case analysis of JPMorgan Chase to illustrate real-world implementation. Data were sourced from peer-reviewed publications, financial reports, and institutional studies. Machine learning models such as Random Forest, Support Vector Machine (SVM), and regression algorithms were examined for their effectiveness in fraud detection. Blockchain’s decentralized and tamper-proof ledger system was analyzed for its role in improving compliance, data integrity, and fraud prevention.
Findings: The integration of AI and Blockchain enhances fraud detection accuracy, reduces false positives, and minimizes transaction manipulation risks. AI-driven predictive models identify anomalies in real time, while Blockchain ensures transparency and immutable recordkeeping. The JPMorgan case demonstrates that these technologies collectively improve operational efficiency, cut investigation time, and strengthen compliance with KYC and AML regulations. However, challenges remain in areas such as data privacy, interoperability, and ethical governance.
Practical Implications: The research provides actionable insights for banks and policymakers to develop AI-Blockchain frameworks that bolster fraud prevention and regulatory compliance while fostering customer trust and financial inclusion.
Originality/Value: This study contributes to the growing body of interdisciplinary research connecting AI, Blockchain, and financial risk management, emphasizing their synergistic potential in transforming global banking security.
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References
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