This bi-monthly column highlights news, reports, government and industry white papers and reports as well as academic papers on the subject of AI’s fast paced impact on many facets of the global financial system. The chronological links provided are to the primary sources, and as available, indicate links to alternate free versions. Each entry includes the publication name, date published, article title, abstract and tags.
At the end of this column I include a useful topical resources list. An example is: IAPP Key Terms for AI Governance Essential terms and explanations for AI governance. This resource list will be updated moving forward.
FT.com, May 18, 2023 – Harness the power of AI to tackle financial crime – Recent breakthroughs in artificial intelligence are rightly seen as a step-change in our technology economy. For the world of finance, much of the reaction has been focused on the risks from this rapid shift. Concerns have rightly been raised(opens a new window) about the capacity of regulators to oversee AI operations, market concentration risks from the small number of service providers, and digital herding where computers all act alike, reinforcing market swings. While calls for caution and proactive regulation are appropriate, so are the calls for urgency and optimism as we empower industries to start harnessing the potential of the AI advances.
Tags: #FinancialCrime #AI #DigitalHerding #regulators #regulation #risk
Finextra, May 31, 2023 – Unlocking Embedded Finance: Dynamic Data and AI Leading the Way – Small businesses starting today may never interact with a conventional bank. By logging into their e-commerce or accounting platform, they can open a deposit account, order a debit card, and meet most of their financing needs. The operators of these platforms are not usually banks. Rather, they are software companies that partner with banks and technology providers to embed financial products into a single seamless, convenient, and easy-to-use customer experience. The world of finance is undergoing a profound transformation as embedded finance gains prominence. Embedded finance integrates financial services seamlessly into non-financial platforms, revolutionizing how we access and interact with financial products. By 2030 the industry expects embedded finance to change market structures and business models.
Tags: #EmbeddedFinance #banking #SmallBusiness #FinancialProducts #FinancialServices
Bloomberg, June 1, 2023 – Wall Street is using AI to rewire the world of finance – Deutsche Bank is using artificial intelligence to scan wealthy client portfolios. ING is screening for potential defaulters. Morgan Stanley says its bankers are “experimenting” in a “safe and contained environment”. Meanwhile, JPMorgan is hoovering up talent, advertising for more AI roles than any of its rivals.
Tags: #AI #portfolios #defaulters #DeutcheBank #JPMorgan
FT.com, June 1, 2023 – Investors turn to AI-guided dealmaking to gain edge over rivals – [read free here] Accountancy firm KPMG, hedge fund Coatue and VC firm Headline among those incorporating the technology. Venture capital funds, private equity groups and accountancy firms are using the latest artificial intelligence to pick acquisition targets and start-ups for investment, betting the technology can give them an edge over rivals. Big Four accountant KPMG, hedge fund Coatue and venture capital firm Headline are among those using the latest AI tools to advise clients and help guide their dealmaking. With investors under pressure to identify the next high-growth start-up at a time when few companies are going public, some argue that dealmakers can benefit from using generative AI for tasks such as assessing a company’s growth potential based on financial analysis. “If you can train or use a model that gets a lot of efficiency first, you will get an advantage in that particular area of the business that is harder for a second mover to do,” said Par Edin, who leads innovation in KPMG’s US deal advisory and strategy business. “It is about getting there first for each and every particular use case.” The pace of artificial intelligence development over the past six months, triggered by the release of OpenAI’s popular ChatGPT — a chatbot that provides humanlike answers to queries — has spurred investors to use the tools to identify fast-growing companies and acquisition targets.
Tags: #KPMG #HedgeFunds #FinancialAnalysis #VentureCapital #accountants #AI #ArtificalIntelligence #OpenAI #ChatGPT #chatbots #AcquisitionTargets
BIS – Bank for International Settlement, June 5, 2023 – Project Leap proves the viability of a quantum-safe financial system – Quantum computers, once they reach sufficient size and power, will be able to easily break the cryptographic encryption schemes currently used to ensure secure financial transactions and data. This is one of the most significant cybersecurity threats facing the financial system today, potentially exposing all transactions and much of our existing stored financial data to attack. Experts refer to that risk as “Q Day.”To prepare central banks and the global financial system for a transition towards quantum-resistant encryption, the BIS Innovation Hub Eurosystem’s Project Leap is investigating how to update and replace the cryptographic security algorithms that the financial system is critically reliant.
- The BIS Innovation Hub Eurosystem Centre, Banque de France and Deutsche Bundesbank successfully set up a quantum-safe communication channel that shields financial data.
- Project Leap addresses the threat that future quantum computers represent to today’s cryptographic algorithms, and thereby to the confidentiality of financial data.
- The experiment’s success paves the way for the partners to build a complete chain of trust for central bank applications, acting as a blueprint for the financial system.
- A secure communication channel designed to protect financial data against future threats from quantum computers has been successfully established by the BIS Innovation Hub Eurosystem Centre and its Eurosystem partners, Banque de France and Deutsche Bundesbank.
- Report – Project Leap: Quantum-proofing the financial system
Tags: #BIS #BankforInternationalSettlement #PorjectLeap #QuantumComputers #FinancialSystem #cybersecurity #FinancialData #algorithms
Waters Wrap, Waters Technology, June 6, 2023 – On cybersecurity, regulators and ‘victim blaming’ – In the wake of the Ion hack, regulators are pushing for firms to beef up their cyber defenses. Anthony says that they’ll need to mind their words and tread carefully, as cloud, machine learning and open source take off. At the tail end of January, Ion Group was hit with a cyber attack that left banks and clearing firms around the globe scrambling for workarounds and calling their lawyers. By mid-March, users were still demanding answers for what exactly went wrong. It’s a simple fact that when it comes to cybersecurity, financial services firms will always be on the back foot. According to sources we spoke to during and after the hack, Ion wasn’t very transparent and communicative in the two months after the attack.
Tags: #cybersecurity #regulators #VictimBlaming #hacking #MachineLearning #OpenSoirce #regulators #lawyers #FinancialServices #CyberAttacks
CFPB Issue Spotlight Analyzes, June 6, 2023 – “Artificial Intelligence” Chatbots in Banking – Asset managers pressure tech companies over possible AI misuse. The Consumer Financial Protection Bureau (CFPB) today released a new issue spotlight on the expansive adoption and use of chatbots by financial institutions. Chatbots are intended to simulate human-like responses using computer programming and help institutions reduce the costs of customer service agents. These chatbots sometimes have human names and use popup features to encourage engagement. Some chatbots use more complex technologies marketed as “artificial intelligence,” to generate responses to customers.
Tags: #CFPB #chatbots #banking #AssetManagers #AI #CustomerServiceAgents #ArtificialIntelligence
Medium, June 7, 2023 – Fintech x AI: The Lightspeed View The future of finance: Not all AI is created equal – AI is not new in fintech. There is a long history of using artificial intelligence and machine learning in fraud, underwriting, and investing, especially as used by risk teams, lenders, and quant hedge funds. In fact, the Financial Crimes Enforcement Network (FinCEN) used forms of artificial intelligence back in the early 1990’s to evaluate large volumes cash transactions to identify potential money laundering. This FinCEN Artificial Intelligence System or “FAIS” uncovered over a billion dollars of money laundering within the first few years of operating in 1993.
Tages: #AI #Fintech #FinCEN #MoneyLaundering #risk #HedgeFunds #MachineLearning #Underwriting #ArtificialIntelligence #FAIS
Fox News, June 7, 2023 – Banking industry pushes back on CFPB’s warning over use of AI chatbot – The Consumer Financial Protection Bureau (CFPB) issued an advisory (June 7,2023) warning of potential risks associated with financial institutions using artificial intelligence-powered chatbots for customer service, as the automated tools surge in popularity.
FT.com, June 7, 2023 – Asset managers pressure tech companies over possible AI misuse and free link – Big institutional investors are increasing pressure on technology companies to take responsibility for the potential misuse of artificial intelligence as they become concerned about the liability for human rights issues linked to the software. The Collective Impact Coalition for Digital Inclusion of 32 financial institutions representing $6.9tn in assets under management — including Aviva Investors, Fidelity International and HSBC Asset Management — is among those leading the push to influence technology businesses to commit to ethical AI.
Tags: #AssetManagers #AI #ArtificialIntelligence #FinancialInstitutions #assets #HumanRights #liability #EthicalAI
Forbes, June 8, 2023 – The Multidimensional Relationship Between AI And Cybersecurity And Its Impact On Fintech – Apart from enhancing functioning, the security of financial institutions is also extremely unique, as cybercrimes constantly target attacks at entities where they can experience the most financial gain. Thus, it is essential that such financial institutions ensure they adequately govern privacy, data protection and cybersecurity matters.
Tags: #AI #cybersecurity #fintech #cybercrimes #cybersecurity #DataProtection #FinancialInstitutions
AEI, June 8, 2023 – Regulating Artificial Intelligence: The Need, Challenges, and Possible Solutions – Artificial intelligence (AI) is increasingly becoming a part of our daily lives. From basic voice assistants like Siri and Alexa to the growing market for autonomous vehicles and advanced medical diagnostics. We have been experiencing the growth of AI and its transformation of various industries at an unprecedented pace. However, as the technology continues to advance rapidly, so do the concerns about its ethical implications and potential risks. This has led to calls for regulating AI to ensure that it is developed and used responsibly. As governments around the world consider the need for regulating artificial intelligence we should have an eye towards global standards that balance innovation and regulation.
Tags: #ArtificialIntelligence #AI #VoiceAssistants #ethics #risk #regulations #GlobalStandards #innovation
Cision, June 21, 2023 – Google Cloud Launches AI-Powered Anti Money Laundering Product for Financial Institutions. Google Cloud today announced the launch of Anti Money Laundering AI (AML AI), an artificial intelligence (AI)-powered product designed to help global financial institutions more effectively and efficiently detect money laundering.
Tags: #AI #MoneyLaundering #FinancialInstitutions #ArtificialIntelligence
WSJ (free audio), June 25, 2023 – Google’s Latest AI Flex: An Anti-Money-Laundering Tool for Banks – The company is looking to set itself apart from a crowded field of surveillance platforms by reducing the amount of human input in the process of screening for money-laundering risks.
Tags: #MoneyLaundering #banks #banking #surveillance