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Future Financial Compliance: Getting Ready for AI Regulation Shifts

February 21, 2024
2 Min Reads

The eight actions that CCOs should do right away to get ready for AI regulation were detailed in a recent post by ACA Group.

AI

In 2023, there was a notable shift in the finance sector, driven by the innovation of AI technologies such as Microsoft's Copilot and OpenAI's ChatGPT. These tools, which have the potential to significantly increase operational efficiency, signaled a major change in the way firms handle routine operations. It's clear that artificial intelligence is gaining traction quickly because over 57 million people signed up for ChatGPT in its first month of availability.

 

For financial institutions' assurance and compliance departments, this quick adoption has two drawbacks. AI has the potential to simplify compliance supervision and increase its efficacy and efficiency, on the one hand. Things that used to take a long time and a lot of labor can now be completed quickly—something that was unthinkable a few years ago. But integrating AI also brings with it a new set of difficulties, such as issues with data privacy, intellectual property, and the possibility of biases and mistakes in AI models.

 

Regulators throughout the world have taken notice of the rise in the use of artificial intelligence. Around thirty nations, ranging from the United States to China, have put up legislative frameworks to handle the threats artificial intelligence (AI) poses to consumers, privacy, and social norms. Prominent figures such as SEC Chair Gensler have expressed concern that unbridled artificial intelligence (AI) can trigger upcoming financial crises, underscoring the pressing necessity for regulatory supervision.

 

The United States' SEC, Congress, and FINRA have acknowledged the possible risks that artificial intelligence (AI) poses to investor protection and market stability. In an attempt to lessen these risks, new policies and procedures for financial services companies have been developed. These steps are meant to guarantee that investor interests are given first priority, data privacy is protected, and market manipulation is avoided when using artificial intelligence techniques.

 

For Chief Compliance Officers (CCOs), this is a pivotal moment in the regulatory landscape. Building comprehensive AI usage policies, completing in-depth risk assessments, and establishing AI governance frameworks are all necessary steps in being ready for upcoming AI laws. It has to do with defending against cybersecurity and privacy risks and making sure AI capabilities are applied sensibly and morally in the financial services industry.

 

Proactive regulatory compliance is crucial, especially as the financial industry continues to work through the challenges of integrating artificial intelligence. CCOs can set up their companies for success in a future where artificial intelligence (AI) plays a major role in finance by acting decisively now.
 

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