Regulation of Artificial Intelligence in Banks: Compliance Guide to Current and Emerging Requirements

What Are the Legal Challenges of AI in Banking Learn Legal and Regulatory Updates Now

The potential for artificial intelligence (AI), especially generative artificial intelligence (GenAI) such as ChatGPT, to play an increasingly important role in financial institutions is inevitable. Until now, many regional and community banks were reluctant to embrace GenAI due to well-publicized errors documented in the early days of the technology. However, we are past those “early days,” and bankers now agree that the “reactionary” period has ended and the “proactive” period of adopting GenAI is on the horizon. Predictably, AI is also raising new legal and regulatory concerns among compliance professionals. These include issues such as data privacy and security and how current requirements apply to AI. The FDIC, for its part, believes that adequate regulation already exists to effectively supervise the use of AI by financial institutions.

The banking industry, however, is not without AI regulation and guidance. In October 2023, President Biden issued an Executive Order designed to manage AI risks while also promoting innovation. Furthermore, the U.S. Congress continues to introduce legislation designed to protect consumer data usage and privacy. One example is the Algorithmic Accountability Act of 2023, which specifically targets GenAI systems. In addition, in April 2023, the CFPB, DOJ, FTC, and EEOC issued a joint statement declaring their commitment to enforcing existing laws and regulations to mitigate the risks of AI. The CFPB then followed this up with guidance specific to credit denials. Financial institutions must also adhere to current data privacy and security and anti-discrimination requirements when implementing AI solutions, as well as the Graham-Leach-Bliley Act and current and potential state requirements.

AI regulation is a fast-moving target, and the reality is that AI can pose significant compliance and operational risks if not implemented properly. Please join Dr. Jim Castagnera, a sought-after speaker and knowledgeable AI and data privacy professional, as he takes you through the current legal and regulatory framework of the financial institution AI and discusses potential new AI requirements that are likely coming down the road.

What You’ll Learn

During this highly informative and important webinar, Dr. Castagnera will discuss:

• Federal legal and regulatory developments, including President Biden’s Executive Order on AI; the proposed Algorithmic Accountability Act; the EEOC’s guidelines on disparate impact discrimination involving AI; and the SEC’s proposed regulations on conflicts of interest involving the use of predictive analytics between broker-dealers and investment advisors.
• The applicability of current federal banking requirements to the use of AI.
• How compliance officers and their institutions can establish an AI program that defines and enforces acceptable use.
• Steps for overseeing and testing AI programs prior to launch, as well as for monitoring compliance.
• Conducting an enterprise-wide risk assessment that includes the evaluation and documentation of third-party and vendor risks.
• Ongoing AI compliance oversight with accountability to senior management and the board of directors.