Australia's financial regulator, Austrac, is pushing back against banks that rely too heavily on AI to generate suspicious activity reports (SARs). According to industry sources, Austrac officials have met with several banks recently to urge more careful use of AI. One major bank was reportedly reprimanded in a private meeting.

Banks have used machine learning to flag suspicious transactions for years. But the shift toward modern large language models only picked up over the past two years, as banks saw the technology as a way to cut costs.

Austrac deputy chief executive Katie Miller said the agency doesn't want a flood of "low-quality" computer-generated reports packed with data but lacking real intelligence value. She warned that banks might be submitting large volumes of reports simply to avoid penalties.

The banks are leaning towards the ends of higher quality but smaller amounts. The more data you’ve got, there's a problem of noise. If banks were looking to use artificial intelligence just to increase the volume (of reports), that’s something we need to assess.