Financial Experts Advise Lawmakers on Future for AI

September 20, 2023 by Tom Ramstack
Financial Experts Advise Lawmakers on Future for AI
Sen. Mike Rounds, R-S.D.

WASHINGTON — Lawmakers sought answers Wednesday on how the U.S. financial industry could reap potentially huge benefits from artificial intelligence while avoiding devastating risks.

Sen. Mike Rounds, R-S.D., summed up the balancing act Congress wants to perform by asking financial industry experts, “How do we not screw it up?”

“We stand in the middle of a journey of monumental change,” Rounds said during a hearing of the Senate Banking, Housing and Urban Affairs Committee.

Some innovations created through the machine learning of artificial intelligence are not regulated, creating loopholes in the laws that could deeply hurt banks, the stock market and the nation’s economy, according to experts who testified at the hearing.

So far, financial industry executives have discussed hopes for bigger profits with AI but largely ignored how it could help fraudsters build on the $50 billion a year banks estimate they lose to computer-based scams.

AI innovations of recent years have allowed banks to tailor promotions to personalized interests of customers, reduce the manpower needed to comply with regulations, more closely analyze credit risks of borrowers and restock the cash in ATMs.

In recent quarterly reports, the financial institutions — along with other corporations — predicted greater efficiency, lower costs and bigger profits using AI.

Lawmakers at the Senate hearing cautioned against a rush by bankers toward AI-inspired profits that could force them to make remedial repairs if they do not prepare for the risks.

In one example mentioned at the hearing, banks sometimes use voice recognition technology to identify their customers for phone transactions. Recent AI language generators can create voices that mimic other persons, potentially allowing fraudsters to mimic bank customers while stealing their money.

“The Silicon Valley ethos of move fast and break things is dangerous for both our financial system and our entire economy,” said Sen. Sherrod Brown, D-Ohio, chairman of the Banking, Housing and Urban Affairs Committee.

He also asked whether the efficiencies the financial industry seeks from AI would be worthwhile only for its top executives but result in widespread layoffs for lower level employees.

“Efficient for whom?” Brown asked.

Experts who testified at the hearing cautioned against the heavy hand of government regulation that could stifle innovation, perhaps leaving the United States behind China and other international competitors.

“It is an area of fierce international competition,” said Daniel S. Gorfine, chief executive officer of the financial industry advisory firm Gattaca Horizons LLC and a Georgetown University law professor.

So far, the United States has been a leader with AI but will hang on to any lead only if government regulators encourage innovation, he and other experts said.

He recommended that regulators assess emerging AI opportunities but avoid “a singular focus on risk” that “can blind us to the greater benefits that may be present.”

“The fear of future harm, however, should not broadly block development of AI in financial services,” Gorfine said.

Melissa Koide, chief executive officer of FinRegLab, a financial services technology research organization, said improved credit analyses from AI could extend credit to about 50 million U.S. adults whose credit risk cannot be assessed through traditional methods.

The result is “the potential to improve fairness and inclusion” in business opportunities for persons who are overlooked by financial institutions now, she said.

Michael Wellman, a University of Michigan computer science professor, said the early stage development of AI holds unforeseen promises and perils for the financial industry.

“AI has surprised us many times,” Wellman said.

You can reach us at [email protected] and follow us on Facebook and Twitter

A+
a-
  • AI
  • banking
  • Housing and Urban Affairs Commitee
  • Mike Rounds
  • Senate
  • In The News

    Health

    Voting

    U.S. Senate

    November 28, 2023
    by Tom Ramstack
    Senate Considers Public Health Strategy to Control Rising Gun Violence

    WASHINGTON — Perplexing problems of gun violence returned to a Senate hearing Tuesday, this time with a proposal for treating... Read More

    WASHINGTON — Perplexing problems of gun violence returned to a Senate hearing Tuesday, this time with a proposal for treating it as a public health crisis rather than purely a law enforcement issue. A near record surge in violence has resulted in more than 38,000 Americans... Read More

    New Jersey First Lady Tammy Murphy to Run for US Senate Seat in 2024

    TRENTON, N.J. (AP) — New Jersey first lady Tammy Murphy on Wednesday launched a bid for the Democratic nomination for... Read More

    TRENTON, N.J. (AP) — New Jersey first lady Tammy Murphy on Wednesday launched a bid for the Democratic nomination for U.S. Senate in next year's contest. Her candidacy, announced Wednesday, puts her in the running to become the first woman elected to the Senate from New... Read More

    November 14, 2023
    by Tom Ramstack
    Supporters of Israel Caution Against Rising Antisemitism

    WASHINGTON — A backlash against the antisemitism that erupted since the Oct. 7 Hamas attack on Israel showed itself during... Read More

    WASHINGTON — A backlash against the antisemitism that erupted since the Oct. 7 Hamas attack on Israel showed itself during a congressional hearing and a demonstration in Washington, D.C., Tuesday. During a House Education and the Workforce subcommittee hearing, lawmakers and witnesses described college campuses as... Read More

    November 13, 2023
    by Dan McCue
    Sen. Tim Scott Suspends Presidential Campaign

    WASHINGTON — Sen. Tim Scott, R-S.C., suspended his bid for the Republican presidential nomination, telling his friend and former U.S.... Read More

    WASHINGTON — Sen. Tim Scott, R-S.C., suspended his bid for the Republican presidential nomination, telling his friend and former U.S. Rep. Trey Gowdy, R-S.C., in a Fox News interview Sunday night, voters had sent him a clear message. “I don’t think they’re saying, ‘No.’ But I... Read More

    November 9, 2023
    by Dan McCue
    Manchin Says He Will Not Seek Reelection to Senate

    WASHINGTON — Sen. Joe Manchin, D-W.Va., announced Thursday that he will not seek reelection in 2024, a decision that was... Read More

    WASHINGTON — Sen. Joe Manchin, D-W.Va., announced Thursday that he will not seek reelection in 2024, a decision that was almost instantly seen as handing the Republicans the seat after next year’s election. In a written statement, Manchin said he came to “one of the toughest... Read More

    November 2, 2023
    by Tom Ramstack
    Senators Want to Subpoena Businessmen Who Gifted Supreme Court Justices

    WASHINGTON — Leading members of the Senate Judiciary Committee said this week they plan to subpoena wealthy businessmen they accuse... Read More

    WASHINGTON — Leading members of the Senate Judiciary Committee said this week they plan to subpoena wealthy businessmen they accuse of trying to influence the U.S. Supreme Court through lavish gifts. They say the businessmen are trying to avoid questions about what appear to be conflicts... Read More

    News From The Well
    scroll top