The Financial Stability Board (FSB), an international body that monitors and makes recommendations on the global financial system, published a paper analyzing the implications of artificial intelligence in financial services and how to mitigate potential risks.
On Nov. 14, the FSB released the document titled “The Financial Stability Implications of Artificial Intelligence,” exploring how AI can influence global financial systems and infrastructure.
The FSB recognized that AI offers many benefits, such as enhancing operational efficiency, personalizing products, improving regulatory compliance and providing advanced data analytics. Still, the FSB said that AI also has the potential to “amplify” vulnerabilities in the financial sector.
AI can amplify vulnerabilities in the financial sector
According to the FSB, some AI vulnerabilities stand out because they can potentially increase systemic risks. They include third-party dependencies and service provider concentration, cyber risks, market correlations and model risks, data quality and governance.
The FSB also recognized that malicious actors may use generative AI to commit fraud. The FSB wrote:
“GenAI also increases the potential for financial fraud and disinformation in financial markets. Misaligned AI systems that are not calibrated to operate within legal, regulatory, and ethical boundaries can also engage in behaviour that harms financial stability.”
On Sept. 4, a report from software firm Gen Digital noted that AI deepfake crypto scammers had ramped up their operations during the second quarter of 2024.
Security experts say that AI-powered deepfake scams will become more complex. A CertiK spokesperson told Cointelegraph it could go beyond videos and audio.
Related: Meta is testing the use of facial recognition to fight deepfake celeb ads
How to mitigate AI risks in finance
In light of its findings, the FSB recommended solutions, including addressing data and information gaps in monitoring AI developments in finance. The FSB also said that it may be beneficial for regulators to “intensify their engagement” with the private sector. This includes service providers, developers and academics.
The FSB said authorities must assess whether current regulatory frameworks adequately address local and international vulnerabilities. Regulators must also consider ways to enhance their capabilities for overseeing policy frameworks related to AI use in finance.
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