CBSL calls on banks to strengthen fraud detection with AI-driven tech

• Emphasises need for proactively identifying suspicious activities and mitigating them real time
• Points out online fraudsters have adopted increasingly sophisticated methods to deceive victims
• Despite AML/CFT frameworks, illicit online transfers escalating in SL’s financial landscape

By Nuzla Rizkiya

With the significant rise in online financial crimes, the Central Bank of Sri Lanka (CBSL) this week called on the financial institutions to explore the possibility of using artificial intelligence (AI)-driven technology to help tackle frauds and scams.

CBSL Governor Dr. Nandalal Weerasinghe asserted that it is time for the local financial institutions to strengthen their fraud detection mechanisms by adopting advanced technologies to safeguard the financial system.

“Fuelled by the rapid expansion of the digital landscape, the global financial sector is witnessing a surge in cyberthreats, money laundering and cross-border illicit transactions, demanding stronger regulatory frameworks and cutting-edge technology solutions,” Dr. Weerasinghe said addressing Compliance Symposium 2025, organised by the Association of Compliance Officers of Banks in Sri Lanka, this week.

“It may be useful for the financial institutions to adopt AI-driven fraud detection and transaction monitoring systems to proactively identify suspicious activities and mitigate them real time,” he added.

Pointing out that the online fraudsters have now begun to adopt increasingly sophisticated methods to deceive their victims, he went on to assert the need for a strong compliance culture, noting that the local anti-money laundering and countering the financing of terrorism (AML/CFT) compliance should go beyond the regulatory reporting and serve as a central element in risk management policies. 

Although Sri Lanka has stepped up efforts in improving its AML/CFT frameworks, illicit online transfers continue to escalate in the country’s financial landscape.

This growing threat has necessitated the financial institutions to ramp up their fraud detection mechanisms and risk assessment systems, in order to safeguard the country’s overall financial system.

“You are tasked with leading the fight against financial crimes and safeguarding the country’s reputation in the global financial landscape,” Dr. Weerasinghe said.

By implementing strong compliance frameworks, he highlighted that the Sri Lankan financial institutions should strive to set a benchmark for other sectors, particularly those that are less mature. 

He suggested the local financial institutions to embrace regulatory technology (RegTech), which has the capacity to automate regulatory reporting and facilitate real-time risk assessments.

“With financial innovations such as digital currencies and fintech-driven payments, the regulatory frameworks now must be agile and forward-looking to address the evolving risks,” affirmed Dr. Weerasinghe.