Rounds Delivers Opening Remarks at Banking Hearing on AI
WASHINGTON – U.S. Senator Mike Rounds (R-S.D.), a member of the Senate Committee on Banking, Housing, and Urban Affairs, delivered opening remarks at a committee hearing titled, “Artificial Intelligence in Financial Services.” Click HERE to listen to Rounds’ opening remarks.
“The U.S. continues to be the birthplace for new innovation in this field,” said Rounds in his opening remarks. “Congress should help shepherd the development of American AI – artificial intelligence that is embodied with key principles to promote confidence and trust – principles like privacy and transparency. We are at a crossroads. Artificial intelligence is real and it’s not going away. We have the opportunity to shape it in a way that reflects the values that are important to us. AI is a tool and it’s up to us whether we harness it to make improvements to our financial system or if we simply fall behind.”
Read Rounds’ full remarks below, as prepared for delivery.
Thank you to our witnesses for being here today to discuss what I believe to be an extremely important topic.
I also want to thank Ranking Member Scott for giving me the opportunity to fill his large shoes today.
We stand at the beginning of a journey of monumental change.
While Artificial Intelligence or AI has been around in various forms for years, recent advances in the most cutting-edge models have shown us just how capable the technology has become.
The financial services industry has already been effectively utilizing AI for decades - just under a different name.
Whether its algorithms, modeling, predictive analytics, or data management, the industry has been using AI and other emerging technology to utilize data and improve the customer experience.
Take fraud prevention as an example.
Despite the billions spent to protect institutions — and the billions paid to buy off attackers — things are only getting worse, with synthetic identity fraud costing banks nearly $50 billion last year.
As many as 95% of phony identities go undetected.
Traditional methods of fraud detection rely on manual verification and human analysis, which unfortunately have failed to keep up with more sophisticated fraud schemes.
By using AI and machine learning, companies can analyze relationships between entities, identify suspicious patterns and visualize intricate connections, revolutionizing fraud detection and investigations.
This allows for a more proactive approach, where AI is used to prevent fraud before it happens as opposed to the traditional reactive approach to fraud detection.
Machine learning and AI have also opened the door to accurate forecasting and prediction.
While a number of industries are asking for regulation, the financial services industry is uniquely poised to adapt to emerging technology.
In a large number of instances, financial regulation is already technology neutral and outcome-based.
If a lender uses AI to determine creditworthiness by harnessing data to predict the probability of default, any technology needs to be compliant and fair-lending focused.
That said, transparency and explain-ability in decision making, especially where credit is involved, are important areas where Congress may play a role.
Lending algorithms can’t exist in a black box and human control is necessary.
AI is data dependent; the technology is only as useful as the quality of data that goes into its models.
The finance sector is one of the few industries that has been collecting, storing, and protecting verified data for decades, making its models some of the most useful.
Therefore, it is imperative that we continue to invest in cyber infrastructure to protect these databases.
It’s critical that we understand how bad actors could abuse AI technology to disrupt our financial system.
However, we must always remember that what was illegal before AI remains illegal; and individuals abusing technology to carry out illicit activities should and will be prosecuted to the fullest extent of the law.
That brings me to the role Congress will play in the regulation of AI.
Moving forward, I think it is important that we take a pro-innovation stance, which will allow the United States to keep and attract the best and brightest talent.
Although we will have many discussions about the dangers, we must also acknowledge that halting progress can be more dangerous, especially as our global competitors, such as China, have no intention of slowing down.
We are already seeing this take place in proposals like the Predictive Data Analytics rule published by the SEC.
In this attempt to control emerging technology, the proposal would cause current successful uses of the technology to suffer.
The U.S. continues to be the birthplace for new innovation in this field.
Congress should help shepherd the development of American AI – artificial intelligence that is embodied with key principles to promote confidence and trust – principles like privacy and transparency.
We are at a crossroads.
Artificial intelligence is real and it’s not going away.
We have the opportunity to shape it in a way that reflects the values that are important to us.
AI is a tool and it’s up to us whether we harness it to make improvements to our financial system or if we simply fall behind.
Thank you, Mr. Chairman.