On July 30, the U.S. House Financial Services Committee Chairman, Rep. French Hill (R-AR), announced the introduction of a new bill to promote AI in financial services: H.R. 4801 will be known as the ‘‘Unleashing AI Innovation in Financial Services Act.” The bill would establish “AI Innovation Labs” to allow financial services entities to experiment with AI without the threat of an enforcement action.
Under the bill, an entity must first submit an application to undertake an “AI test project.” As part of the application, the entity must: (i) identify the specific regulations or statutes it wants waived or modified; (ii) propose an alternative method of compliance that fulfills the intent of the original regulation or statute; and (iii) justify why that alternative is necessary. If approved, the entity may operate under that alternative compliance strategy for a defined period, with specific limitations. Of note, another financial regulator may not enforce its regulations against an entity unless the other regulator is described in the application’s “alternative compliance strategy.”
The bill would allow for injunctive relief. If a financial regulator determines that a test project presents an immediate danger to consumers or investors, or presents a risk (i) to financial markets, (ii) of loss to a Federal deposit or share insurance fund, (iii) of a violation of anti-money laundering or countering the financing of terrorism obligations, or (iv) to the national security of the U.S., then the regulator may file a civil action to enjoin the AI test project.
The bill would also provide that financial regulators promulgate rulemaking in the Federal Register within 180 days of enactment, addressing procedures for changing AI test projects, consequences for non-compliance with an alternative compliance strategy, a minimum duration of one year for any approved AI test project, confidentiality protocols, and procedures for coordinating decisions.
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