FSB calls for stricter oversight against AI vulnerabilities

The Financial Stability Board (FSB), an international body that monitors and makes recommendations on the global financial system, published a paper analyzing the implications of artificial intelligence in financial services and how to mitigate potential risks. 

On Nov. 14, the FSB released a document titled “The Financial Stability Implications of artificial intelligence.” Within the paper, the FSB explored how AI can influence the existing financial systems and infrastructure globally. 

The FSB recognized that AI offers many benefits, such as enhancing operational efficiency, personalizing products, improving regulatory compliance, and providing advanced data analytics. However, the FSB also believes that AI has the potential to “amplify” vulnerabilities in the financial sector. 

AI can amplify vulnerabilities in the financial sector

According to the FSB, some AI vulnerabilities stand out because they can potentially increase systemic risks. This includes third-party dependencies and service provider concentration, cyber risks, market correlations and model risks, data quality and governance. 

The FSB also recognized that malicious actors can use generative AI to commit fraud. The FSB wrote: 

“GenAI also increases the potential for financial fraud and disinformation in financial markets. Misaligned AI systems that are not calibrated to operate within legal, regulatory, and ethical boundaries can also engage in behaviour that harms financial stability.”

On Sept. 4, a report from software firm Gen Digital highlighted that AI deepfake crypto scammers ramped up their operations during the second quarter of 2024. Security experts also believe that AI-powered deepfake scams will become more complex. A CertiK spokesperson previously told Cointelegraph that this could go beyond videos and audio.

Related: Meta is testing the use of facial recognition to fight deepfake celeb ads

How to mitigate AI risks in finance

In light of its findings, the FSB recommended solutions, including addressing data and information gaps in monitoring AI developments in finance. The FSB also said that it may be beneficial for regulators to “intensify their engagement” with the private sector. This includes service providers, developers and academics. 

The FSB also said that authorities must assess whether current regulatory frameworks are adequate to address the local and international vulnerabilities. In addition, regulators must also consider ways to enhance supervisory and regulatory capabilities for overseeing policy frameworks related to AI use in finance. 

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