Strategies for Managing Black-Box AI Risks in Finance

This guide addresses the risks associated with black-box artificial intelligence (AI) in the financial services sector. It outlines the remarks made by Acting Comptroller of the Currency Michael Hsu regarding the accountability and risk governance challenges posed by AI's opaque algorithms, particularly in credit decision-making. The document emphasizes the importance of transparency and explainability as highlighted by various regulatory bodies, including the Consumer Financial Protection Bureau and the U.S. Department of the Treasury. It presents three key strategies for financial institutions to mitigate risks: creating an AI inventory to assess model transparency, identifying AI applications that trigger legal explainability requirements, and establishing ongoing assessment and monitoring processes for AI models. The guide underscores the necessity for institutions to ensure that their AI systems are compliant with regulatory standards while maintaining fairness and accountability in decision-making processes.