ALFI - Association of the Luxembourg Fund Industry’s Post

The capability of acquiring large sets of data from the environment and processing it with artificial intelligence (AI) and machine learning (ML) is changing the financial sector landscape. AI/ML facilitates enhanced capacity to predict economic, financial, and risk events; reshape financial markets; improve risk management and compliance; strengthen prudential oversight; and equip central banks with new tools to pursue their mandates. While it brings its own set of challenges and potential risks, the effectiveness of AI/ML-models depend on data standardization, quality, and completeness, which is proving to be a challenge for regulators and financial institutions alike. We at Nth Exception invite market infrastructures and financial institutions of all sizes to use Nucleus for proof-of-concept collaborations to discover the potential of ISO 20022 structured data. Image: Nasscom report https://lnkd.in/gP2-ZGRX Hannah Davis Alvina Fullonton #payments #banking #iso20022 #centralbanks

Last Thursday (30/5/2024), the European Securities and Markets Authority (ESMA) released a pivotal Statement providing guidance for firms integrating Artificial Intelligence (AI) into investment services aimed at retail clients. As AI reshapes the financial landscape, ESMA emphasizes adherence to MiFID II, ensuring organizational conduct and client-centric business practices remain in focus. The guidance addresses the challenges and risks associated with AI, including algorithmic biases, data quality, privacy issues, and the transparency of AI-driven decisions. Firms are urged to manage these risks while harnessing AI for customer support, fraud detection, risk management, and more, ensuring they act in the best interests of their clients. Follow Global Regulatory Insights to stay updated on how AI is transforming the investment sector and what it means for businesses and consumers. #ArtificialIntelligence #InvestmentServices #FinancialRegulation #ESMA #MiFIDII #DigitalFinance #GRI #InvestorProtection

The #European #Securities and #Markets #Authority (#ESMA), issued yesterday a #Statement providing initial guidance to #firms using #ArtificialIntelligence #technologies (#AI) when they provide #investment #services to #retail #clients. When using AI, ESMA expects firms to comply with relevant #MiFIDII requirements, particularly when it comes to organisational aspects, conduct of business, and their regulatory obligation to act in the best interest of the client. Although AI technologies offer potential benefits to firms and clients, they also pose inherent risks, such as: ➖ #Algorithmic #biases and #data #quality issues; ➖ Opaque decision-making by a firm’s staff members; ➖ Overreliance on AI by both firms and clients for #decisionmaking; and  ➖ #Privacy and #security concerns linked to the #collection, #storage, and #processing of the large amount of #data needed by #AIsystems. Potential uses of AI by investment firm which would be covered by requirements under MiFID II include #customer #support, #fraud #detection, #riskmanagement, #compliance, and support to firms in the provision of #investment #advice and #portfolio #management.  #economy #finance #banking #investments

🤖 Embracing AI in Financial Markets: Opportunities and Challenges 📈 The financial services sector is increasingly deploying AI technologies, with 99% of leaders reporting adoption in some capacity. The Commodity Futures Trading Commission (CFTC) has launched initiatives like the Technology Advisory Committee (TAC) to explore AI's impact on regulatory policies and market dynamics. 🔍 This report from the Emerging and Evolving Technologies Subcommittee underlines the importance of responsible AI governance and risk management. It delves into AI's potential applications, including fraud detection, customer relationship management, and predictive analytics, among others. 🛠️ Crafting a robust framework for AI adoption requires collaboration between the CFTC, registered entities, and other stakeholders. The report proposes recommendations such as hosting roundtable discussions, adopting an AI Risk Management Framework (RMF), and aligning AI policies with other federal agencies. 💡 By fostering dialogue, establishing clear guidelines, and enhancing internal capacity, the CFTC can ensure the safe, trustworthy, and responsible integration of AI in financial markets. #AI #FinancialMarkets #Regulation #RiskManagement #FinancialServices #CFTC #Technology #Governance #ArtificialIntelligence #PolicyDevelopment #FinancialIndustry #EmergingTechnologies #Compliance

A report by HKMA - Insights for Design, Implementation and Optimisation of Transaction Monitoring Systems. It detailed the regulatory expectations on the use of AI in transaction monitoring systems (TMS). Case studies are used to illustrate common characteristics which demonstrated the ability to collectively optimise and strengthen the effectiveness and efficiency of TMS. The thematic review revealed a number of good practices that underpin successful deployment: • Planning • Readiness, talent and other considerations • Change management • Data governance and data quality • Model testing, validation and periodic review • Awareness of limitations #AML #TransactionMonitoring #TM #TMS #AI #Screening #AMLCFT #AMLCTF #FinancialCrime #ArtificialIntelligence #MachineLearning #ML #Regulations #Compliance #RegulatoryExpectations #HK #HKMA

The Future of AI in European Finance: Balancing Innovation with Client Protection. The European Securities and Markets Authority (ESMA) recently issued important guidance on how financial institutions in the EU can leverage Artificial Intelligence (AI) while upholding client best interests and complying with MiFID securities regulations. This is a timely development, as AI holds immense potential to transform investment strategies and client services within the financial sector. However, its use also necessitates careful consideration of potential risks and robust oversight mechanisms. Here are the key takeaways for European financial institutions: 🔹️Ultimate Responsibility Lies with Management: Regardless of whether decisions are made by humans or AI-powered tools, the final responsibility rests with the firm's management body. 🔹️Client Best Interest at the Forefront: ESMA emphasizes the unwavering commitment to acting in clients' best interests, irrespective of the technology employed. 🔹️Third-Party AI Scrutiny: The guidance applies not just to internally developed or adopted AI tools, but also extends to third-party technologies like ChatGPT and Google Bard, even if their use isn't explicitly endorsed by senior management. 🔹️Understanding and Oversight are Crucial: Management must possess a clear understanding of how AI technologies are implemented within their organization and ensure proper oversight of these systems. This initiative by ESMA comes ahead of the EU's landmark AI regulations coming into effect next month, which are poised to set a global standard for responsible AI development and deployment. As the G7 nations also work towards establishing guardrails for this rapidly evolving technology, the European financial sector has a unique opportunity to become a leader in harnessing AI's potential while prioritizing customer protection. If u liked it , u can subscribe to my newsletter Insight_vault https://lnkd.in/d4eNRyjB for weekly updates on AI , TECH. #AI #finance #regulation #ESMA #MiFID #financialtechnology #clientexperience

Mastering the Art of Regulatory Compliance: Key Steps to Mitigate Risks and Stay Ahead of Change    The financial sector is facing significant regulatory updates, and keeping up with these evolving regulations is crucial for firms. In our recent webinar, industry experts from Ruleguard, BNY Pershing and NatWest Group provided insights on managing these challenges and changes efficiently. Watch here: https://lnkd.in/eVtTEuQK   Key topics covered include upcoming regulatory changes, strategies for effective change management, and how RegTech solutions, including AI and machine learning, can help streamline compliance processes.   During the webinar, an interactive survey was carried out to find out: 🎯 Key challenges firms face when managing regulatory changes 🎯 Main concerns when adopting new Gen AI/LLMs 🎯 Confidence in the firm's regulatory change management framework Download the infographic to view full results! 👉 https://lnkd.in/eGRD7in5 #regulatorychange #grc #regtech #riskandcompliance

#Davos2024 boasts a lineup of insightful events, with Artificial Intelligence stealing the spotlight. The potential of AI in the #RWA sector, from real-time data analysis to risk management and KYC enhancement, promises an array of possible optimizations. Neither #AI, nor RWA are just trends - they are here to change the financial industry. 🔗 cogito.finance

🚀 How can GenAI revolutionise our job in Financial Services? I was doing some research using our Sia Partners tools and I was so happy with the results that I wanted to share it with everyone! Take a look at the screenshot you can immediately see the benefits: 💡 The tool summarises the key considerations for me 🌐 Each bullet point can be traced back to the original document, eliminating hallucinations 🏔 It tells me the potential parties impacted in the organisation ⤴ The workflow button on the top right, allows me to assign it to a compliance workflow! This is our #regreview tool, part of the suite of AI tools we have in #siapartners that we use to enhance the capabilities of our consultants. Don't worry, you can also access to it if you are our client! Reach out to learn more! Claire Yuyao Z.Yuchen JiaVincent KasbiKathleen RaminosoaRyan ChengSang Joon AhnJeremy FetiveauHelina LoNolan KamDavid HollanderNai Zhiyun #regulations #compliance #genai #bpm #workflow #HKMA #AI #digitalassets #custody #financialservices #risk Hong Kong Monetary Authority (HKMA)

Randall S. Kroszner (external member of the Financial Policy Committee (FPC) and of the Bank’s Financial Market Infrastructure Committee (FMIC), BoE) echoes his thoughts on the opportunities and risks presented by financial technology and artificial intelligence (AI). 5 takeaways from his speech: Recent developments in technology and artificial intelligence (AI) have the potential to drive innovation and productivity growth in the financial services industry. The distinction between fundamentally disruptive innovation and incremental innovation is important for regulators to consider when addressing the regulatory challenges posed by technology and AI. The interpretability of AI models and the potential for misalignment with human needs and values are key concerns in the context of financial stability. Operational resilience is crucial in the face of increasing reliance on technology and AI in the provision of financial services. Ongoing dialogue and collaboration between regulators, policymakers, and industry stakeholders are essential for navigating the challenges and opportunities presented by technology and AI in the financial sector. #futureoffinance #fintech #aiinbanking #ai #risk #riskgovernance #regulatoryaffairs #banking #financialmarkets #financialmarketinfrastucture