Congressional bill supports AI innovation in financial services sector

A bipartisan, bicameral bill pending in both houses of Congress aims to help promote the innovation of artificial intelligence (AI) in the nation’s financial services industry.

Specifically, the Unleashing AI Innovation in Financial Services Act, H.R. 9309 / S. 4951, would provide for regulatory sandboxes that permit certain persons to experiment with AI without the expectation of enforcement actions.

“It is crucial we push our legislation forward to make sure we get AI regulation right while allowing for innovation and experimentation,” said U.S. Rep. French Hill (R-AR), who sponsored H.R. 9309 on Aug. 6 alongside cosponsor U.S. Rep. Ritchie Torres (D-NY). “AI is a rapidly advancing tool that we need to fully understand because it is going to impact every aspect of our lives.”

“The financial services industry has been using AI for decades, but as major advancements in the technology emerge, companies must be able to innovate,” said U.S. Sen. Mike Rounds (R-SD), who led S. 4951 in his chamber on Aug. 1. “The Unleashing AI Innovation in Financial Services Act is designed to foster innovation and economic growth by providing a controlled environment where new financial products and services that use AI can be tested.”

Under the bill, such controlled environments, or regulatory sandboxes, would be established for AI test projects at the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, the National Credit Union Administration, and the Federal Housing Finance Agency.

“By creating these sandboxes, we aim to strike a balance between encouraging innovation and maintaining consumer protection, ultimately strengthening our financial system and keeping our country at the forefront of global financial technology,” Rounds explained.

If enacted, the bill would require that each regulated entity submit an application to the appropriate financial regulatory agency to engage in an AI test project, according to the bill’s text. The applications must describe examples of test projects, such as an alternative compliance strategy that identifies a regulation issued by the appropriate financial regulatory agency or a federal statute that the regulated entity requests to be waived or modified; or a proposed alternative method for the regulated entity to comply with the regulation or statute.

“The Unleashing AI Innovation Financial Services Act would ensure our federal agencies allow for the companies they regulate to experiment with AI in regulatory sandboxes,” said Hill. “This is a pivotal step to allow both government and the private sector to collaborate and learn together, as the U.S. must lead in the development and use of AI technology.”

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