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Rise of the Machines Must Be Monitored, Say Global Finance Regulators (reuters.com)
A reader shares a report: Replacing bank and insurance workers with machines risks creating a dependency on outside technology companies beyond the reach of regulators, the global Financial Stability Board (FSB) said on Wednesday. The FSB, which coordinates financial regulation across the Group of 20 Economies (G20), said in its first report on artificial intelligence (AI) and machine learning that the risks they pose need monitoring. AI and machine learning refer to technology that is replacing traditional methods to assess the creditworthiness of customers, to crunch data, price insurance contracts and spot profitable trades across markets. There are no international regulatory standards for AI and machine learning, but the FSB left open whether new rules are needed.
This extends beyond financial matters, but credit and insurance are huge examples, and things that actually can be semi-regulated. The banks or insurance companies will be incentivized to pay their "AI company" a premium to perform analyses on data that they wouldn't normally be allowed to, and could say with a straight face that they weren't the ones who did it. And since "AI algorithms" would be a trade secret of that company, they wouldn't be under any obligation to reveal what kinds of data crunching the banks were paying them to do.
Two real-world examples I can think of where this arms-length transaction thing happens include the following:
- I work for a multinational company that often has to ship physical equipment to places where getting that equipment through customs is a huge challenge, requiring either bribes or accepting the fact that you won't see it for months, or maybe it might get "lost in transit." Obviously the company can't bribe the customs officials, but international logistics is full of "freight forwarder" companies. Those companies have the contacts needed, and can get your cargo through for a fee...which unsurprisingly includes the bribe you would have to pay.
- I've also seen more times than I can count in my career where a new CIO comes in and announces they're outsourcing IT to Tata, Infosys, Wipro or similar. At that point all in-house employees become Wipro employees, and Wipro fires them the second their offshore counterparts are trained. The company who hired them can then say "We're not responsible for how our IT partner provides the service they're contracted to provide."
It's the equivalent of Pontias Pilate washing his hands of the messy business...because it's abstracted away under someone else's control.