THE ALGORITHMIC ALCHEMY: SYNTHESIZING GLOBAL LEGAL FRAMEWORKS FOR ARTIFICIAL INTELLIGENCE IN FINANCIAL SERVICES

Cicilia Anggadewi Harun, Safari Kasiyanto, Camila Amalia, Shinta Fitrianti, Esha Gianne Poetry, Nilasari, Rina Megasari and Naura Pradipta Khairunnis
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Cicilia Anggadewi Harun: Bank Indonesia
Safari Kasiyanto: Bank Indonesia
Camila Amalia: Bank Indonesia
Shinta Fitrianti: Bank Indonesia
Esha Gianne Poetry: Bank Indonesia
Nilasari: Bank Indonesia
Rina Megasari: Bank Indonesia
Naura Pradipta Khairunnis: Bank Indonesia

No WP/20/2025, Working Papers from Bank Indonesia

Abstract: This study examines and recommends regulatory and liability frameworks for the use of artificial intelligence in financial sector. Algorithmic bias, the black-box aspect of AI, data privacy concerns, and unequal treatment are the primary focus of this study. It employs normative, comparative, and empirical juridical analyses by assessing at AIrelated laws and cases, comparing AI governance models across jurisdictions, and undertaking focus group discussions with academics, industry stakeholders, and regulators. For the comparative analyses the study evaluates the regulatory models and AI-related cases in the European Union, the United States, Singapore, Australia, China, and Qatar. The result shows Indonesia should use a hybrid model that begins with an adaptive sandbox phase, moves toward a risk-based framework to balance innovation and responsibility, and subsequently transitioning to a co-regulatory model as AI utilization escalates. Additionally, considering that AI is a non-legal subject, the proposed Clear Box Liability framework puts a strong emphasis on human accountability through proportional liability principles. Furthermore, the FairSight Liability Model strengthens consumer protection, transparency, and effective dispute resolution in AI-driven financial services by integrating fairness and foresight.

Keywords: Artificial Intelligence; AI Regulatory Framework; AI Bias; Consumer Protection; AI in Financial Services; AI Liability Framework (search for similar items in EconPapers)
JEL-codes: A11 B11 C11 D11 F11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2025
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