ASIC Warns That Financial Industry’s Governance Practices Lag Behind AI Adoption Pace
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Australian financial regulator, the Australian Securities and Investment Commission (ASIC) recently issued a warning for financial services and credit licensees. The regulator urged them to make sure their governance practices are keeping pace with the growing rate of AI adoption.
Governance Practices Lag Behind AI Adoption
The warning to keep an eye on governance practices came after the regulator conducted a review of the state of the market, looking into the use and adoption of AI. The review found that 23 licensees held the potential for governance to lag AI adoption, despite the fact that the current AI use is being fairly cautious.
Joe Longo, the Chair of ASIC, stated that ensuring that the governance frameworks are up to date for the planned use of artificial intelligence is crucial for licensees. They must ensure it in order to be able to meet future challenges that will likely emerge as this technology matures.
Longo further added that the review has revealed that the use of AI by the licensees has focused predominantly on supporting human decisions and improving efficiencies. But, he also warned that the volume of AI use is accelerating and that around 60% of licensees plan to ramp up their AI usage going forward.
This could be a significant change that could change the way AI impacts consumers, according to Longo.
ASIC Chair Explains What Needs To Happen
ASIC’s findings have revealed that almost half of license holders have adopted artificial intelligence without having proper policies in place. They require policies that consider consumer fairness or bias. Not to mention that there are even fewer organizations or companies that have policies obligating them to disclose the use of AI to their customers.
Longo commented on this as well, saying that the path forward is clear — governance needs to become commonplace and adequate for the potential surge in consumer-facing AI. However, he stressed that time is of the essence, and that this must be done quickly.
“Without appropriate governance, we risk seeing misinformation, unintended discrimination or bias, manipulation of consumer sentiment and data security and privacy failures, all of which has the potential to cause consumer harm and damage to market confidence,” he explained.
Finally, Longo noted that licensees need to consider their existing obligations and duties for consumer protection in terms of deploying AI. They cannot simply wait for AI laws and regulations to be introduced, as this could take a while, meanwhile, companies are using AI already, which could increase risk for their customers. He concluded by saying that ASIC will take enforcement action if it detects misconduct.