Artificial intelligence (AI) is revolutionising Oman’s banking industry, bringing sweeping changes to fraud detection, anti-money laundering (AML) compliance, and operational efficiency. However, financial institutions must navigate data governance challenges, regulatory compliance, and ethical AI use to fully harness AI’s potential, according to Dr Jihad bin Rashid al Wahshi, Head of Data Management at the Central Bank of Oman (CBO).

In an interview with Observer on the sidelines of the Oman AI Summit 2025, Dr Al Wahshi emphasised that AI-driven systems are transforming the fight against financial crime by enabling real-time fraud detection and predictive analytics.

“Traditional fraud detection systems often struggle to keep up with evolving threats, leading to high volumes of false positives,” he said.

“AI, particularly machine learning, can analyse vast amounts of data to identify subtle anomalies, allowing banks to act proactively rather than reactively.” However, he noted that the effectiveness of AI models depends on high-quality data, regulatory alignment, and continuous adaptation to emerging threats. “Fraudsters are becoming more sophisticated, even using adversarial AI to manipulate models,” he warned. “This requires a multi-layered approach that combines robust data governance, continuous model training, and strict compliance frameworks.”

AI ENHANCING ANTI-MONEY LAUNDERING COMPLIANCE

AI is also proving to be a game-changer in AML compliance, streamlining processes that have traditionally been labor-intensive and prone to inefficiencies. Dr Al Wahshi highlighted that conventional rule-based AML systems generate excessive false positives, overwhelming compliance teams. “AI-driven AML solutions enable dynamic transaction monitoring and intelligent risk scoring,” he explained.

“They assess transactional data in real time, identifying patterns that indicate potential money laundering activities.”

However, he stressed that AI’s effectiveness in AML hinges on strong data governance.

“Data silos and inconsistent formats hinder AI’s ability to generate accurate insights,” he said. “Ensuring data integrity, traceability, and security is paramount for both compliance and customer trust.” Regulatory bodies are increasingly emphasising the importance of explainability and accountability in AI-driven compliance. “AI systems must be transparent and auditable,”

Dr Al Wahshi noted. “Financial institutions must ensure that automated decisions can be explained to regulators, auditors, and customers.”

INNOVATION, SECURITY, AND THE FUTURE OF BANKING

The integration of emerging technologies such as AI, blockchain, and cloud computing is essential to fostering a secure and efficient financial ecosystem in Oman. AI enhances risk management and decision-making, while blockchain ensures transparency in cross-border transactions and digital identity verification. Cloud computing, meanwhile, facilitates the scalability of AI-driven solutions.

“To fully leverage these technologies, Oman’s financial sector must adopt a collaborative approach involving regulatory authorities, financial institutions, and technology providers,” Dr Al Wahshi said.

“Regulatory frameworks should evolve to support innovation while maintaining stringent security and data protection standards.”

He also underscored the importance of workforce upskilling, as AI adoption requires specialised expertise. “The talent gap in AI and data science remains a challenge,” he noted. “Investing in training programs and fostering partnerships with universities can help bridge this gap.”

OVERCOMING AI ADOPTION CHALLENGES IN BANKING

While AI presents immense opportunities, several hurdles must be addressed to ensure its successful adoption in Oman’s banking sector. These include: Data Quality and Integration: Many banks operate in siloed data environments, limiting AI’s ability to generate accurate insights. A strong enterprise-wide data governance framework is necessary to address this issue.

Legacy IT Systems: Outdated banking infrastructure is not optimised for AI-driven solutions. A phased digital transformation strategy, including cloud adoption, can help integrate AI seamlessly.

Regulatory Uncertainty: AI adoption in banking is still evolving within Oman’s regulatory landscape. Financial institutions must engage with regulators proactively to shape policies that ensure compliance without stifling innovation.

Dr Al Wahshi also highlighted the importance of ethical AI governance. “AI must be deployed responsibly,” he stated. “Banks should establish internal AI ethics committees to oversee compliance with regulatory guidelines and ethical standards.”

PUBLIC-PRIVATE COLLABORATION: THE WAY FORWARD

For AI adoption to thrive in Oman’s banking sector, strong collaboration between the public and private sectors is necessary. Dr. Al Wahshi recommended several key initiatives, including regulatory sandboxes that allow financial institutions to test AI solutions in controlled environments.

“The Central Bank of Oman can play a crucial role in developing AI guidelines covering data privacy, ethics, and accountability,” he said. “At the same time, banks and fintech companies must work together to build secure AI-powered ecosystems that enhance risk management, fraud prevention, and financial inclusion.”

As Oman accelerates its digital transformation in line with Vision 2040, AI is poised to play a defining role in shaping the future of banking. However, success will depend on the industry’s ability to balance innovation with robust data governance, regulatory compliance, and ethical AI practices.

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