easy · Frm Part 2 Current Issues
A bank finds that its AML (Anti-Money Laundering) AI model has a 95% false-positive rate.
Why might a CRO still prefer this over a rule-based system with a 99% false-positive rate?
- Because high false-positives are required by Basel III.
- Because AI models are exempt from Model Risk Management (MRM) if they have high false-positives.
- Because the AI model likely improves the 'recall' (catching more true laundering) while still reducing the total investigation workload.
- Because the 95% rate proves the model is 'fair' to all customers.
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