Artificial Intelligence (AI) and Risk Management: An Islamic Banking Perspective Online First

Abstract

The Islamic banking industry is flourishing quickly in the business. It encounters multifarious challenges in its operations. Artificial intelligence (AI) has become central to governing banking operations by integrating sophisticated technology. Islamic banking is adopting this technology to determine risks, recognize and stop payment fraud, strengthen anti-money laundering (AML) processes, and execute further administrative know-your-client (KYC) screenings. We used a qualitative research process, extracting data from secondary sources. The data were derived from research articles, related websites, book chapters, and regulatory guidelines. This paper examines the integration of AI in Islamic banking operations and how it identifies anomalies in the operations, maintaining Shariah compliance and ethical considerations. The study traced that the effective integration of AI necessitates a full analysis of technological, legal, and ethical factors. It requires incorporating data security, privacy concerns, and regulatory compliance. The study also investigates that AI has the capacity to significantly benefit society and the global economy by enhancing opportunities, improving consumer protection, and boosting productivity. This research emphasizes employing AI in the Islamic banking industry by streamlining data analysis, automating procedures, optimizing client interactions, and enhancing compliance and security.