EXPERT FORECAST : BANKING AND FINANCE
HOW THE EU AI ACT WILL IMPACT FINANCIAL INSTITUTIONS
The EU AI Act , which came into force on 1 August 2024 , is a significant legislative development for financial institutions ( FIs ). With provisions starting to apply over a period of six to 36 months , most of the Act ’ s rules will be enforceable after two years . And it has major implications , especially for FIs using high-risk AI systems like credit scoring models and risk assessment tools . David Salloum , Group Legal Director at Eastnets , tells us more .
AI ’ s potential in trade finance , risk management and in the fight against financial crime is vast . However , effective regulation is needed to ensure trust and safeguard fundamental rights . The EU AI Act is a key step in this direction , ensuring AI evolves safely and ethically .
The key elements
The Act applies to AI systems marketed , used or impacting individuals within the EU , including those from non-EU countries . It takes a risk-based approach , categorising AI applications based on risk levels , with stringent requirements for high-risk use cases , such as critical infrastructure and law enforcement among a list of eight areas .
High-risk AI systems must meet strict data quality and governance standards . This ensures software isn ’ t trained on poor or incomplete data that could lead to an adverse outcome . Documentation and traceability and transparency are required to ensure AI can be audited and its decisions explained . Human oversight is mandated to allow for intervention in AI decisions , which is crucial for applications in medical diagnoses or legal cases .
Additionally , the Act mandates the use of synthetic or anonymised data when training AI models to detect and correct bias . Synthetic data , artificially created rather than collected from real-world events , helps ensure AI systems are fair and accurate . If these methods reduce bias , then AI system providers must use them .
Consequences for financial institutions
For FIs , adhering to these requirements is crucial . In doing so , there are some important actions to take . Firstly , if it www . intelligentfin . tech
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