ALGORITHMIC BIAS AND DATA PRIVACY IN AML TRANSACTION MONITORING: A COMPARATIVE ANALYSIS OF INDIA, UZBEKISTAN AND EUROPEAN UNION

Banks and payment platforms increasingly rely on outside software vendors to run the artificial intelligence and machine learning systems behind their anti-money laundering (AML) and Know Your Customer (KYC) checks. This arrangement lets institutions process enormous volumes of transaction data far more efficiently than legacy systems allowed, but it also raises a hard question: when something goes wrong, who actually answers for it? If a third-party AI vendor builds a transaction-monitoring tool that leaks personal data or wrongly flags innocent customers, who carries the legal responsibility the company that wrote the code, or the bank that bought and deployed it? Across India, Uzbekistan, and the European Union, the financial institution not the vendor acts as the primary custodian of customer data and remains fully, non-delegable liable for algorithmic discrimination or privacy breaches caused by an outsourced AI system. A vendor contract cannot transfer away a bank’s statutory duties.