is critical that financial institutions are not only able to understand and explain this process, but also that all the data used within the AI system meet regulatory requirements. This means ensuring that the AI system isn’t using information that may violate consumer or fair lending laws. Financial institutions that are utilizing AI should have processes in place that allow for the identification of risk, both new and emerging, as well as controls for managing that risk. Because of the rapidly evolving technologies of AI, there is always the challenge of changes in risk level or even unidentified risk developing. Financial institutions need to be prepared to rise to the occasion when it comes to meeting those regulatory and risk challenges, whether that be through an increased frequency of monitoring and reviewing established controls or contracting with external vendors to conduct robust third-party risk management. The use of AI technologies within financial institutions has captured the interest of regulators and policymakers alike. A couple of key concerns are always the safety and soundness of financial institutions and consumer protections. While AI is constantly growing and advancing, many of the banking laws and regulations currently on the books are still a little behind the times, leaving some areas of regulatory uncertainty. Nevertheless, regulators acknowledge the benefits of AI and support responsible innovations by financial institutions. In 2021, the agencies (Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve Board) issued RFIs (requests for information) on the use of artificial intelligence by financial institutions. In 2022, the OCC (Office of the Comptroller of the Currency) issued supervisory expectations for how banks should manage risks associated with AI. And most recently, in April 2023, a joint statement was issued by the agencies on the enforcement efforts against discrimination and bias in automated systems. The 2023 statement outlines some of the challenges of AI and serves as a reminder that financial institutions must embrace responsible innovation. Conclusion For financial institutions to thrive in the industry and remain relevant in the market, they must continue to be forward-thinking and responsible in their innovation efforts. Artificial intelligence is an ever-evolving technology and convenience of the world in which we live. Financial institutions must engage in the balancing act of supporting new and innovative technologies for their consumers while also acknowledging the risks and challenges of such growth. It is imperative to fully understand the technologies that our institutions rely on for its operation and that we remain abreast of any arising issues in the regulatory world. Artificial intelligence is the future, and it’s filled with risks and rewards. Scan the QR code to read the joint statement on enforcement efforts against discrimination and bias in automated systems. https://files.consumerfinance.gov/f/documents/cfpb_jointstatement-enforcement-against-discrimination-bias-automatedsystems_2023-04.pdf 20 West Virginia Banker
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