Unleashing AI Innovation in Financial Services Act

Financial firms could get federal rules waived to test AI — and applications not decided in time count as approved.

The details

Banks, credit unions, brokers, and other financial firms could test artificial intelligence under relaxed rules. Each of the seven federal financial regulators would set up an "AI Innovation Lab." A firm could apply to have a specific regulation waived or modified for an AI test project. The application must propose an alternative way to satisfy the underlying law. It must also describe risk controls, cybersecurity plans, record-keeping, and a proposed end date for the test. Regulators would have 120 days to decide, with one 120-day extension available. If that deadline passes with no decision, the application counts as approved. The standard for approval is whether the firm shows it is more likely than not that the project qualifies. Once approved, the waived rule can be enforced only as the alternative strategy describes. Other agencies generally could not enforce it. A denied applicant may amend and reapply, but not more than twice with a substantially similar plan. Some authority stays put. Regulators keep full power over fraud, market manipulation, and unsafe or unsound practices. They can go to court to halt a project that poses immediate danger to consumers or investors. The same applies to risks to markets, to federal deposit or credit union insurance funds, to anti-money-laundering duties, or to national security. Each agency must write implementing rules within 180 days, with a 60-day public comment period. Those rules must require firms to tell customers when they are dealing directly with an AI test project. Each agency then reports to Congress annually for eight years, without naming participating firms. Insurance is excluded from the framework.