Federal financial regulators have flagged multiple concerns regarding AI, such as the potential for perpetuating algorithmic bias and facilitating fraud through deepfakes. Despite these risks, there is also recognition of AI’s potential benefits, including improved detection of illicit activities, enhanced back-office efficiency, and more inclusive underwriting processes.
Acting Comptroller of the Currency Michael Hsu cautioned that AI’s ability to learn sets it apart, making it easier to disclaim responsibility for adverse outcomes. He suggested adopting a “shared responsibility model” from cloud computing, where safety and security responsibilities are clearly divided between financial firms and AI service providers.
Hsu argued that past financial innovations, like derivatives and cryptocurrencies, went off the rails due to rapid adoption without sufficient controls. He warned that AI might follow a similar trajectory if not properly managed. He urged banks to establish checkpoints to ensure responsible AI innovation and prevent runaway growth.
