Global Trustee and Fiduciary Services Bite-Sized Issue 10 2024

3 QUICK LINKS CBDC CRYPTOASSETS FINTECH LIBOR TRANSITION OPERATIONAL RESILIENCE PRIIPS SUSTAINABLEFINANCE/ESG T+1 ASIA/PACIFIC EUROPE NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 10 | 2024 The UK Government has also announced in a written statement that it accepts the recommendation to set up an expert group who can provide guidance on technical and legal issues relating to digital assets. The Ministry of Justice has asked the UK Jurisdiction Taskforce, an expert group chaired by the Master of the Rolls that produces non-binding guidance on areas of legal uncertainty, to take forward this work. The Law Commission’s recommendations on other matters, including collateral arrangements for crypto-tokens, are still under consideration. Link to the Bill here Link toWritten Statement here Link to UK Government Press Releas e here Link to LawCommission Digital Assets Project Webpage here FINTECH OECD/FSB Roundtable on AI in Finance: Summary of Key Findings On 30 September 2024, the Organisation for Economic Co-operation and Development (OECD) and the Financial Stability Board (FSB) published the key findings arising from a round table, held on 30 May 2024, with experts from the public and private sectors and with academics to analyse trends and use cases of artificial intelligence (AI) in finance. The roundtable highlighted the rapid adoption of predictive AI systems, including Machine Learning (ML) and Generative AI (GenAI), particularly in banking and insurance. These technologies have increased efficiency in operations, risk modelling, fraud detection, and financial crime prevention, among other areas. The industry is also exploring the potential of GenAI for internal applications such as summarisation, translation, and information retrieval. In asset management and securities markets, the roundtable discussed the role of AI, in areas such as portfolio management, trading, and risk management. These tools are being used to optimise asset allocation decisions by facilitating fundamental analysis through quantitative and textual data, generate trading signals, automate trades, and validate and back test risk models. Despite its benefits, the use of AI raises concerns around model risk, data protection, and governance. Participants highlighted the importance of data quality, governance, privacy, and ethics. They also highlighted potential financial stability risks posed by AI deployment in the financial sector. Industry representatives advocated for a risk-aligned step-by-step implementation of GenAI models with a comprehensive understanding and management of AI tools across all levels of organisations. In terms of financial consumer protection, AI has provided benefits such as convenience, accessibility, timely information, cost-efficient services, and enhanced user experience. However, deepfakes and deceptive AI-based outcomes, data protection, privacy and confidentiality issues, and bias and discrimination pose significant challenges. The deployment of GenAI systems introduces additional risks related to the quality and reliability of the model output. The limited trustworthiness of these models is aggravated by the potential lack of awareness of their limitations by users and the recipients of their outputs. The roundtable concluded with a call for policy makers to promote the safe use of AI in financial services. Participants emphasised the need for a risk-based approach for model risk management and the importance of international co-operation to develop standards and share good practices. They also highlighted the need for national financial regulators to constantly assess their regulatory capabilities. Link to the Summary here