Artificial Intelligence has become an integral part of our world. The financial world is also making increasing use of the new technology, for example within transaction monitoring, computer vision and customer authentication. Although the technology brings many benefits, it also presents many ethical dilemmas.
In the Compliance Advises Podcast (1), host Jeroen Broekema talked about it with Joris Krijger and Johannes de Jong.
Johannes de Jong is a partner at Osborne Clarke (2). He once started as a lawyer at Allen & Overy, where his interest in the financial sector and the regulation surrounding it was sparked. After working for the AFM for several years, he joined Osborne Clarke. Here he and his team advise on the intersection of regulation and tech applications in the financial sector.
De Jong is flanked in this podcast by Joris Krijger, Ethics & AI Officer at Volksbank (3), where he started working on fair algorithms after studying Economic Psychology and Philosophy. In addition to the practical side, Krijger got the opportunity to engage in ethical AI and how it is put into practice through doctoral research at Erasmus University.
With his philosophical background, Krijger looks at developments in technology and in particular AI with a slightly different lens and what it can mean as a systems technology for people and their work.
He draws a comparison to a century ago when electricity meant the same thing that AI does now and will do next. "It's going to fundamentally change the way we live and work," he says firmly.
He says that also applies to work within the bank, where you can think of various AI applications in a variety of departments, for example, HR, credit scoring, fraud detection and transaction monitoring. "Banks are generally pretty well-equipped to develop something on that," Krijger said, while at the same time seeing the impact AI has on the availability of jobs in various sectors.
According to a recent EMF report, in advanced economies, 60% of jobs are going to be touched by AI and 30% will be complementary to it. "So AI is going to help increase productivity, but it will also replace some of the jobs," observes Krijger. "So you really have to think about how we bridge this system transformation as an organization as well as an industry in a good way."
De Jong agrees with him. At the same time, he also sees an interesting technological development in the financial sector regarding regulation. "That is becoming unprecedentedly future-proof. Regulations are much less behind the times and I think that opens the door for a huge acceleration in the financial sector as well."
The Osborne Clarke partner notes that it has been well thought out and that directives today are much more "technology neutral." "It means that regulation itself does not try to prescribe what it regulates technologically," it sounds somewhat cryptic, but "it actually regulates manifestations," De Jong explains.
In addition, he cites risk management as one of the most important aspects related to new regulations coming up, such as the AI act. De Jong also sees that compliance officers and their teams find it difficult to validate what they get back from the engineers and from the ICT people. "That requires a very different kind of risk management," he says.
That creates an area of tension, acknowledges De Jong, who understands that banks struggle with it because on the one hand they don't want to be left behind, but on the other they don't yet know how decisions are made.
"Still, I think you have to start. Every bank has to do something," it sounds emphatic. "We don't know what the future is going to look like yet, but you have to come along, you have to gain experience."
That also touches on the ethical issues surrounding AI, which Krijger sees as one of the most important challenges right now He cites, for example, the bias that can creep into systems, as well as (a lack of) technical and moral infrastructure. "We need that to take full advantage of AI, but we don't have the infrastructure in organizations to think about those ethical aspects properly."
That leaves the tricky question of who is ultimately responsible for the ethical aspects of AI. This is still unclear in many organizations because, on the one hand, you can't expect administrators to be fully informed about developments within AI. "On the other hand, you also can't expect to put the responsibility on the developers and have them translate all those standards into the applications they develop."
Ethically, there are several risks. Warrior cites bias, or bias that permeates a model, as one of the most important. A concrete example is the fact that women still get paid less for the same work. ""If we don't pay enough attention to ethics, algorithms can pick up and magnify that inequality."" According to him, as an organization you then have to be willing to ask questions such as: "Do we need to adjust that? Is it our responsibility to do something with that?'
"These are ethical issues that you have to think about right now when you start working with AI," Krijger says emphatically.
Regardless, the compliance officer has a lot to deal with. When asked by Broekema what he or she needs to start doing especially in the field of AI, De Jong has some self-reflective advice: "As a compliance officer, you have to be honest with yourself, so look at yourself in the mirror and make sure that where you feel you don't have enough visibility, you're going to fix that."
Krijger sees more than enough challenges for the compliance officer when it comes to AI. "That's because of the nature of AI. Because technology continues to evolve outside of office hours and you have to deal with that as well. Compliance officers need to prepare for monitoring AI and monitoring with AI."
Therefore, according to the AI officer at De Volksbank, in this role you have to think about numerous new technologies and how applicable they are. "Whether it can be added to all the things compliance officers already do I don't know. But that it has to be added, that seems certain to me," Krijger said.
(1) https://www.complianceadviseert.nl/
(2) https://www.banken.nl/partners/osborne-clarke
(3) https://www.banken.nl/bank/de-volksbank
