The legal challenges associated with the use of AI in the financial institutions
Abstract
The popularity of artificial intelligence (AI) in banking and finance has grown exponentially over the past decade; however, the legal regulation and the oversight on the use of AI instruments have lagged behind. Commentators have acknowledged that practitioners in the finance industry often use the AI without fully comprehending how the algorithm functions and that some AI instruments are deliberately discriminating consumers. This project examines the legal and regulatory challenges (related to data quality, causation and liability) brought by the growing use of AI in the sector and considers the potential reforms that can be pursued to optimise the commercial exploitation of the AI. In doing so, the researcher takes a look at how the use of AI in both the UK and the KSA has been regulated and the legal challenges that the financial industry has faced. The research has revealed that the financial sector is to undertake a multi-stakeholder approach and borrow from the expertise of different stakeholders to ensure that the regulatory requirements are properly addressed. Regular fitness checks should also be performed to confirm that the optimal functioning of the AI tools and their compliance with the existent legal frameworks.