US Treasury Secretary shares remarks about use of AI in finance

At a conference hosted by the Financial Stability Oversight Council (FSOC) and Brookings Institution, US Treasury Secretary Janet L. Yellen announced the department’s newest remarks on the use of AI in financial institutions. This comes as an update to similar remarks made during an FSOC meeting in December 2023 and in its 2023 Annual Report. 

In the first part of her address, the Secretary noted the opportunities and risks of AI generally, highlighting the use of automation in the financial sector for many years and the department’s regulation of it, citing model risk management guidance and third-party risk management. However, she warned of other risks to do with the ‘complexity and opacity’ of new AI systems. She noted the difficulty of regulating an increasing amount of AI systems, but also avoiding dependence on a few. 

Why is this important?

To address this “rapidly evolving field”, the Treasury released a report providing current use cases and practices of AI for cybersecurity and fraud prevention in the financial sector. Work is also being done with international partners in this field, Yellen said. Towards the end of her address, the Treasury Secretary mentioned a request for comments from private and public actors, as well as a round table discussion after this. She also mentioned that the council’s monitoring will be continued and adapted in line with the rapid implementation of AI in the financial sector.

Yellen’s remarks fall into a more general discussion over the regulation of new technologies. In 2022, the Treasury issued a framework for international engagement on digital assets. However, elections, like the ones in the US this year, may discourage lawmakers from legislating AI in time, further raising fears of further AI-created deepfakes or robocalls.