HB Ad Slot
HB Mobile Ad Slot
DOJ and SEC Officials Issue Harsh Warnings Concerning the Misuse of AI
Friday, February 16, 2024

In separate public speeches, senior officials from the Department of Justice and the Securities and Exchange Commission warned of harsh penalties against individuals and companies misusing AI for fraudulent purposes.

On February 13, before an audience at Yale Law School, SEC Chair Gary Gensler promised “war without quarter” on individuals and financial firms that misuse AI for fraud. While acknowledging that AI opens up “tremendous opportunities for humanity” and, at least in the world of finance, “greater financial inclusion and enhanced user experiences,” it also raises a lot of risks that, while not new, are accentuated by its use, such as biased decision-making. Gensler warned that while some companies are actually committing fraud, others are being reckless by not properly testing or vetting technology before it is put into use. Gensler noted that if AI’s are optimized to take the interest of the platform into consideration as well as the interest of the customer, this can lead to conflicts of interest. He noted that the SEC has proposed rulemaking that could be adopted by the end of the year that would require brokerage firms and investment advisers to eliminate the use of predictive data analytics and related tools that put a firm’s interest before that of its investors.

The following day, and before an audience at the University of Oxford, DOJ Deputy Attorney General Lisa Monaco also spoke on AI and highlighted the danger that the misuse of AI could have on “democracies around the world.” With the world at an “inflection point” with AI, she stated that the misuse of AI-based technology is a top priority of the DOJ and announced the creation of a new Justice Department initiative called “Justice AI” which will involve academics, scientists, industry professionals and foreign counterparts across the globe to better prepare for AI’s potential risks. Likening the use of AI in criminal activity to that of firearms, she stated that AI technology enhances the danger of unlawful activity. She promised stiffer sentences for offenses that are made significantly worse by the misuse of AI. She added that if existing enhancements to the sentencing guidelines do not adequately address the harm that comes from AI, the DOJ will push to reform them. 

Putting it into Practice: These speeches highlight the seriousness with which federal regulators and law enforcement professionals are viewing the use and possible misuse of AI. The responsible use of AI has been a top priority for the Biden administration as demonstrated by the White House’s efforts to establish new standards for AI safety and security. Companies seeking to use AI for their products, or partner with AI-centric providers should be aware that federal regulators will be taking a hardline at the negligent use of such technology, as even unpredictable results that harm consumers can lead to penalties. Companies should conduct appropriate testing and diligence on any products and providers to ensure compliance with applicable law.

HB Ad Slot
HB Mobile Ad Slot
HB Ad Slot
HB Mobile Ad Slot
HB Ad Slot
HB Mobile Ad Slot
HB Ad Slot
HB Mobile Ad Slot
 

NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins

 

Sign Up for e-NewsBulletins