AI is a danger to the financial system, regulators warn for the first time | CNN Business (2024)

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AI is a danger to the financial system, regulators warn for the first time | CNN Business? ›

Late last year, the Financial Stability Oversight Council, a team of leading regulators led by the Treasury secretary, for the first time formally classified AI as an “emerging vulnerability.” Experts are especially worried about how AI can turbocharge financial fraud.

However, hallucination, algorithmic bias and vulnerability to data quality issues present risks to the accuracy of AI predictions. If financial entities base their decisions on faulty AI predictions which are not checked, this could lead to outcomes that may result in economic losses or even disorderly market moves.

AI in the News

A top banking regulator is warning about the “potential explosion” of fraud fueled by artificial intelligence and says policymakers should consider new approaches to who bears the costs of that fraud.

Real-life AI risks

There are a myriad of risks to do with AI that we deal with in our lives today. Not every AI risk is as big and worrisome as killer robots or sentient AI. Some of the biggest risks today include things like consumer privacy, biased programming, danger to humans, and unclear legal regulation.

AI platforms for the banking industry have the ability to analyze customer data to develop a deep understanding of customers' needs and enable FIs to design tailored experiences that meet those needs.

Security and Exchange Commission (SEC) chair Gary Gensler recently cautioned against “the possibility of AI destabilizing the global financial market if big tech-based trading companies monopolize AI development and applications within the financial sector,” the paper noted.

Lack of Transparency

AI-powered tools may use complex algorithms and machine learning to analyze data and make decisions, but it can be difficult for humans to understand how these decisions are made. This lack of transparency can lead to errors and bias, and can also make it difficult to detect and correct mistakes.

One of the most significant impacts of AI in finance is the automation of manual tasks. AI-powered systems can generate reports, process large amounts of data, and perform administrative tasks efficiently.

What did Elon Musk say about AI? ›

"I do think it's very important that we build the AI in a way that is beneficial to humanity," he said. "The AI should not be taught to lie, it should not be taught to say things that are not true. Even if those things are politically incorrect, it should still say what it believes to be true."

The short answer to this fear is: No, AI will not take over the world, at least not as it is depicted in the movies.

Will AI replace humans? No, AI will not replace human intelligence, as it is humans who are developing AI applications through programming and algorithms. Automation makes it easier to replace manual labour, and today, in every sector, these AI technologies are making it easier to complete complex tasks.

AI is never going to fully replace human employees, and is widely expected to be a boon for the workplace. About 30% of the hours employees currently work will be automated by 2030, according to a report from McKinsey. This will free up some workers to focus on more strategic projects.

The biggest misconception is that AI will replace accountants and auditors. It will not replace us but elevate us to the higher level of thinking and service. Basically, it takes away the mundane repetitive tasks that we never really wanted to do in the first place.

The future of finance roles

This means that finance professionals must adapt to these changes and embrace the complementary nature of humans and technology. While some tasks may become automated or delegated to AI systems, this does not mean human jobs will be replaced entirely.

The future of finance roles

This means that finance professionals must adapt to these changes and embrace the complementary nature of humans and technology. While some tasks may become automated or delegated to AI systems, this does not mean human jobs will be replaced entirely.

AI is changing the work of finance professionals and accountants by automating repetitive operations, improving fraud detection, offering real-time insights, and modernizing audit processes. As the accounting industry embraces these AI technologies, professionals must adjust and develop the skills to use AI properly.

Lack of Transparency

AI-powered tools may use complex algorithms and machine learning to analyze data and make decisions, but it can be difficult for humans to understand how these decisions are made. This lack of transparency can lead to errors and bias, and can also make it difficult to detect and correct mistakes.

Data Privacy and Security

Banks collect large amounts of data from customers, and AI algorithms require access to this data to function effectively. If sensitive data exist, as is often the case with financial data, any security breach could have serious consequences.