Evaluating legal and governance frameworks in preventing Artificial Intelligence-related fraudulent activities in public companies

Artificial Intelligence (AI) has become a cornerstone of technological advancement, driving innovation across industries. The rapid growth of AI in companies requires a robust framework focusing on accountability, transparency, fairness and security. The framework should be able to address potential biases and errors within the AI systems. AI should facilitate innovation, allowing faster and more accurate responses to business challenges whilst increasing efficiency, improving decision-making, reducing cost and enhancing customer experience. Past studies mostly discovered that AI governance is in the infancy stage. Absence of adequate security measures may lead to risks of potential fraud as the companies may lack the monitoring or knowledge to properly handle emerging vulnerable management. This study examined the role of corporate governance mechanisms in regulating the use of AI in public companies with a specific focus on preventing, detecting and mitigating AI-enabled or AI-related fraudulent activities. This study adopted a doctrinal research methodology involving a critical examination of primary and secondary legal sources as well as examining the current legal, regulatory and governance relating to the usage of AI. Findings revealed a significant regulatory inadequacy in Malaysia, where current laws lack decisive provisions to address AI-related fraud. Traditional corporate governance mechanisms may fail to identify, monitor, or respond effectively to fraud. There is a need to update an AI-related legal and governance framework, aligning with global best practices to reduce cases of fraud. This paper contributes to the literature on the governance of AI, and assists legislators and policymakers in balancing accountability, transparency and trust in corporate practices.