Ethical Implications and Regulatory Challenges of Artificial Intelligence in Finance

Abstract

Artificial Intelligence (AI) has emerged as a transformative force in the financial sector, reshaping operations such as risk management, credit scoring, algorithmic trading, fraud detection, and customer service. While these innovations have enhanced efficiency, accuracy, and personalization, they also raise complex ethical and regulatory challenges. Issues of data privacy, algorithmic bias, transparency, accountability, and systemic risk pose significant concerns for financial institutions, regulators, and society at large. This paper provides a theoretical analysis of the ethical implications and regulatory challenges of AI in finance, drawing insights from existing literature, global regulatory frameworks, and ethical debates. It emphasizes the need for robust governance, ethical AI principles, and harmonized regulatory approaches to ensure responsible innovation in financial services.