'Threading a fine needle' between AI benefits and risks

While both financial services firms and regulators can gain considerable efficiencies from artificial intelligence, there are serious questions around accountability for the technology's decision-making, how to maintain oversight as it self-evolves, along with systemic risks. Claude Brown explores the issues.

Claude Brown is a partner with Reed Smith who has extensive expertise in sustainable and social finance, as well as all aspects of derivatives. Contact him on cbrown@reedsmith.com.

Artificial Intelligence is already being used widely across the financial services sector. Indeed, although AI is seen as a developing technology, it has been used in the industry for a number of years, albeit at times badged as automation or machine learning rather than AI. For instance, firms have been deploying AI to improve Know Your Client and anti-money laundering checks, as well as repetitive and high-volume back-office tasks. The motivation is simple: firms are seeking greater efficiency and cost savings to reduce the pressure on their margins.