U.S. regulatory agencies this week confirmed that they are engaged in active monitoring of artificial intelligence in the financial industry. According to a group of agencies that included the Justice Department, Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission, officials are concerned about how AI use in the financial sector could increase the potential for civil rights violations.
As Reuters notes in its report, there has been a rapid increase in automation throughout a number of industries across the United States, including lending and other banking services. The agencies warned financial firms that ongoing monitoring will be conducted to ensure that reliance on those automated systems does not contribute to a rise in racial bias or other forms of discrimination.
CFPB seeking whistleblowers
Rohit Chopra, the head of the CFPB also confirmed that the agency would like to hear from whistleblowers in the technology industry. Regulators would like more information about how tech solutions might heighten the risk of civil rights violations.
Chopra noted that many financial firms may not be able to explain how AI makes its credit determinations. By law, lenders must provide consumers with those explanations, so that lack of understanding poses a real problem. Indeed, the CFPB Director claimed financial companies cannot use AI technology unless they understand how the tech makes its decisions,
“What we’re talking about here is often the use of expansive amounts of data and developing correlations and other analyses to generate content and make decisions. What we’re saying here is there is a responsibility you have for those decisions.”
Innovation: AI use in the financial sector
Banks and other financial institutions continue to integrate AI and other new technologies into their services, of course. Meanwhile, regulators will be watching the developments. Federal Trade Commission chair Lina Khan cautioned businesses to remember, “Claims of innovation must not be cover for lawbreaking.”
AI use in the financial sector has already shows tremendous promise for the companies that adapt the technology. Artificial intelligence technology is helping many banks to develop a better understanding of their customers and their needs. In addition, banks are integrating AI into everything from risk management to credit scoring.
One of the more interesting examples of AI use in the financial sector involves JPMorgan Chase. The company recently revealed the creation of an AI model to analyze 25 years of speeches from the Federal Reserve. That ChatGPT-based AI model is designed to rate past policy signals to create the bank’s so-called “Hawk-Dove Score.”
