Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), expressed his belief in the potential benefits of greater utilization of artificial intelligence (AI) by the agency’s staff. In a speech on July 17, Gensler outlined various applications of AI that could assist the SEC in its role as a securities regulator, including market surveillance, disclosure review, examinations, enforcement, and economic analysis.
The SEC has taken enforcement actions against at least 54 cryptocurrency firms from 2018 to the first half of 2023, with 17 in the first half of 2023, following a significant increase after the collapse of FTX in November. While Gensler did not provide specific details on how AI could be employed, he praised the technology and its positive impact on financial markets and humanity as a whole. He likened AI’s transformative potential to that of the internet and the mass production of automobiles.
However, Gensler also acknowledged lingering issues with AI. He noted that many AI systems are marred by biases and deception, encroach upon privacy rights, and give rise to conflicts of interest. Biases in predictive AI models can stem from historical biases, leading to inaccuracies and false predictions. Gensler even cited a personal experience of falling victim to misinformation when a fake AI-generated text of his resignation circulated online on July 1, 2023.
Conflicts of interest arise when AI systems prioritize the company’s interests over those of the customer. Gensler expressed concern over such conflicts and requested SEC staff to propose rules addressing these potential conflicts across various investor interactions. Additionally, Gensler warned about the emergence of AI monopolies and their potential to disrupt the economy, potentially playing a role in a future financial crisis.
Apart from this belief, companies like Amazon and Mastercard are already taking steps for innovation and combatting payment scams and fraud with the help of AI tools, recently Amazon Web Services (AWS) has launched the AWS Generative AI Innovation Center, investing $100 million to support startups focused on advancing generative AI technologies. This initiative aims to accelerate enterprise innovation by harnessing the power of generative AI, enabling businesses to achieve unprecedented productivity and creativity.
Meanwhile, Mastercard has also developed an AI-driven tool called “Consumer Fraud Risk” to help banks combat payment fraud and scams. By analyzing extensive transaction data, the AI system can anticipate and prevent fund transfers to accounts linked to “authorized push payment scams.” This technology aims to enable banks to proactively intervene in real-time, protecting their customers’ finances from potential threats.