Artificial intelligence (AI) is poised to affect every aspect of the world economy and play a significant role in the global financial system, leading financial regulators around the world to take various steps to address the impact of AI on their areas of responsibility. The economic risks of AI to the financial systems include everything from the potential for consumer and institutional fraud to algorithmic discrimination and AI-enabled cybersecurity risks. The impacts of AI on consumers, banks, nonbank financial institutions, and the financial system’s stability are all concerns to be investigated and potentially addressed by regulators.
It is the goal of Perficient’s Financial Services consultants to help financial services executives, whether they lead banks, bank branches, bank holding companies, broker-dealers, financial advisors, insurance companies or investment management firms, the knowledge to know the status of AI regulation and the risk and regulatory trend of AI regulation not only in the US, but around the world where their firms are likely to have investment and trading operations.
South Korea
In South Korea, efforts to enact the AI framework act have been underway since 2020. Nine different regulations have been proposed, but none have been passed into law. While the Personal Information Protection Act (PIPA) includes provisions related to AI, such as the exercise of data subjects’ rights concerning automated decision-making, comprehensive legislation has yet to be enacted.
United Kingdom
Bank executives who have their London trading desks over in Canary Wharf must remember Brexit and that Great Britain is not in the EU. The Financial Conduct Authority (FCA) regulates artificial intelligence (AI) in the UK by focusing on identifying and mitigating risks, rather than prohibiting specific technologies. The FCA and FSA’s approaches to AI regulation are based on the five principles of safety, security and robustness; appropriate transparency and explainability; fairness; accountability and governance; and lastly contestability and redress. Similar to Japan and South Korea, the UK is yet to pass a law or regulation specifically directed to regulating the use of AI at financial services firms.
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