HalluDetect: Detecting, Mitigating, and Benchmarking Hallucinations in Conversational Systems in the Legal Domain

AbstractLarge Language Models (LLMs) are widely used in industry but remain prone to hallucinations, limiting their reliability in critical applications. This work addresses hallucination reduction in consumer grievance chatbots built using LLaMA 3.1 8B Instruct, a compact model frequently used in industry. We develop **HalluDetect**, an LLM-based hallucination detection system that achieves an F1 score of **68.92%** outperforming baseline detectors by **22.47%**. Benchmarking five hallucination mitigation architectures, we find that out of them, AgentBot minimizes hallucinations to **0.4159** per turn while maintaining the highest token accuracy (**96.13%**), making it the most effective mitigation strategy. Our findings provide a scalable framework for hallucination mitigation, demonstrating that optimized inference strategies can significantly improve factual accuracy.