Netherlands Welfare Case Sheds Light on Explainable AI for AML-CFT (Compliance & Enforcement)

Winston Maxwell and Xavier Vamparys, two of our teacher-researchers, members of the XAI4AML Chair, answered questions from Jonathan Silverstone for the blog “Complience and Enforcement ” of the New Yok University of Law about the use of artificial intelligence by the government in the fight against social fraud.

The District Court of the Hague, Netherlands found that the government’s use of artificial intelligence (AI) to identify welfare fraud violated European human rights because the system lacked sufficient transparency and explainability. As we discuss below, the court applied the EU principle of proportionality to the anti-fraud system and found the system lacking in adequate human rights safeguards. Anti-money laundering/countering the financing of terrorism (AML-CFT) measures must also satisfy the EU principle of proportionality. The Hague court’s reasoning in the welfare fraud case suggests that the use of opaque algorithms in AML-CFT systems could compromise their legality under human rights principles as well as under Europe’s General Data Protection Regulation (GDPR).