This is the last instalment in a three-part series examining how new European Union rules affecting artificial intelligence will affect development and the use of AI and what this means for the private banking and wealth management community.
This is the last instalment in a three-part series examining
how EU legislation affects the world of AI. (See parts one
and two.)
Artificial intelligence (AI) continues to be the focus of
increasing public attention; board members at wealth management
firms and financial institutions around the world need to take AI
technologies seriously. This article – from compliance,
regulatory, and legal experts – includes discussions on
AI’s impact on financial services and wealth management firms,
what firms in the industry can do, and suggests a potential path
forward. In light of recent stories and euphoria concerning AI
and its reported capability to drive the biggest labour market
shift since the industrial revolution, we are writing three
articles on the topic from personnel at CMS Law (Charles
Kerrigan and Isabel Neelands) and AI &
Partners (Sean Musch and Michael Charles
Borrelli).
AI is a topic of such significance that it needs thorough
consideration. Readers are aware that we have to provide
actionable ideas as to what the problems are, and suggestions
about how to deal with them.
(The editors are pleased to share this content, and invite
feedback. As ever, any views of outside contributors are subject
to editorial disclaimers. We invite debate and feedback, so
please email [email protected].
)
AI has global implications, requiring robust
safeguards
Reduced concern of unilateral regulatory
consolidation
The European Commission’s proposed Harmonised Rules on Artificial
Intelligence (the EU AI Act) aspires to establish the first
comprehensive regulatory scheme for artificial intelligence, but
its impact is felt beyond the EU’s borders. Indeed some EU
policymakers believe it is a critical goal of the EU AI Act to be
the first to set a worldwide standard on AI regulation, to the
extent that some refer to a “race to regulate AI” (1). This
framing implies that there is both value in regulating AI
systems, and that being among the first major governments to do
so will have broad global impact to the benefit of the EU
– often referred to as the “Brussels Effect.”
However, while some components of the EU AI Act will have
profound effects on global markets, Europe by itself will not be
setting a comprehensive new international standard for AI.
Firms with cross-border operations need to take
note
The EU AI Act will affect non-EU businesses even if they do not
have a legal presence in the EU. The global scope is due to the
European Commission’s heightened concern about the possibility
for harm embedded in AI systems and its potential impact on the
fundamental rights, safety, security, and freedoms of
individuals.
While multinational AI providers may be glad to have one set of
rules, the extraterritorial scope will raise potential compliance
challenges, particularly for providers of high-risk AI systems
established outside of the EU who may not be aware of or able to
determine where the outputs of their AI systems are used (see
Figure 1).
It is possible that output of the AI system will be used in the
EU by users of the AI system without the provider’s knowledge.
Figure 1: Extra-Territorial Application of the EU AI
Act
Lots of AI-fuelled exciting opportunities
exist
Ongoing compliance remains paramount
The key takeaway from our exploration of the EU AI Act”s
implications is the importance of proactive measures. Firms, as
always, must diligently assess their AI systems and processes,
ensuring full alignment with the EU AI Act’s guidelines to
mitigate potential risks and liabilities.
Moreover, by prioritising compliance, they can safeguard their
reputation and enhance client confidence in an increasingly
AI-driven landscape.
Power of partnerships
Navigating the complexities of AI regulation calls for
collaboration and expertise. Partnerships with AI compliance
specialists provide organisations with access to deep knowledge
and experience in AI compliance. Use of AI compliance specialists
can be seen as a strategic move, providing invaluable reassurance
in an increasingly complex business world. By leveraging the
expertise of trusted advisors, firms can navigate AI regulation
successfully, empowering them to make the most of AI’s
transformative capabilities.
Proceed with caution, with an innovation-first
mindset
As we look forward, the potential of AI across industries is both
thrilling and promising. Under the regulatory framework provided
by the EU AI Act, the global economy is primed to embrace AI
responsibly, ensuring transparency, fairness, and
accountability.
Organisations will be empowered to make well-informed,
data-driven decisions, driving enhanced client experiences, and
delivering tailored solutions that cater to individual needs and
aspirations. We can all agree that the future of AI is built on a
foundation of compliance, collaboration, and responsibility. By
proactively embracing the EU AI Act, businesses can unlock the
true potential of AI, redefining the landscape and elevating the
industry to new heights of success.
Footnote:
1,
https://www.fca.org.uk/insight/ai-transparency-financial-services-why-what-who-and-when
