The Legal Landscape of AI in Financial Services
As technology continues to evolve, the possibility of utilizing AI in financial services to obtain more lucrative results has become much more realistic. However, how is AI being regulated?
What is AI?
AI (or artificial intelligence) is the simulation of human intelligence processes by machines, especially computer systems. Machines taking advantage of AI can assist humans to make businesses much more efficient.
The Advantages of AI in Financial Services
AI is already providing a slew of benefits in many institutions.
In the financial sector, AI is being used to deliver several financial products, from providing ‘Robo-advice’ to making trading decisions.
Is AI profitable?
By handling, analyzing, and processing data with speed and precision, as well as taking care of the increasingly autonomous activities of IT systems, AI is set to determine who will be successful in the new digital financial landscape.
Unfortunately, artificial intelligence isn’t sentient. Despite being “intelligent”, its complexity can also make it tough to control and prone to errors. Being a program that needs to learn, AI is especially fallible when it comes to ethics.
Examples of ethical concerns with AI are issues regarding privacy, accountability, and transparency.
For example, if AI makes a mistake who is held liable?
AI and the Law
There is definitely potential for legal disputes when artificial intelligence systems behave unexpectedly. Examples could be decisions made within an existing contract, if it creates a new contract on its own or even one with another AI system.
Additionally, negligence on the behalf of the AI may result in financial loss, which, individuals may try and claim. In such a situation, the application of the rules of tort s largely untested against AI.
With the rapid speed at which new technology develops, regulation can struggle to keep up. While many governments can see the potential for AI, there is still a necessity to protect citizens and address the ethical, legal, social, and economic issues associated with AI.
Currently, there is very limited specific AI legislation, both in general and as applicable to financial institutions. Instead, existing laws and regulations are being used to govern AI, with some corporations self-regulating their AI using ethical guidelines on the advice of a legal consultant.
As it stands, it seems that most regulators have adopted a “wait and see” approach, applying existing frameworks to the emerging technology for now, with a few others debating hotly on the subject.
The Future of AI in Law and Legal Practice
While the general use of AI may still be a few years away, governments and regulators still need to start by addressing the issues already developing by AI that are being used by financial institutions.
But, for now, it remains to be seen how regulations will develop at national, regional, and international levels.