Artificial intelligence (AI) has been embraced within the financial services space, thanks largely to its ability to improve operational efficiencies, instantaneously analyze data, and assist advisers in delivering a more fulsome client experience.
From automating document generation to analyzing compliance policies for potential risks, AI can be used to help firms of any size function more efficiently. At the same time, it’s important for financial professionals to remember the potential risks and pitfalls associated with AI – and keep in mind that human review and support is still necessary.
Not only does introducing more technology (and more specifically, technology that may require an advanced skillset or knowledge to understand) open your firm up to potential cybersecurity challenges, but it can also throw a wrench in your current compliance Policies and Procedures.
AI and Data Privacy: 5 Best Practices for Balancing Compliance and Trust
Investment advisers and other financial services firms have a responsibility to balance the benefits of AI with the imperative to protect sensitive client data. Here are five ways you can work to more effectively navigate your compliance obligations while incorporating AI into your firm.
1. Update Your Technology-Focused Policies and Procedures
Within your compliance procedures, establish specific policies regarding technology, AI, and protecting sensitive data. Assume everyone in your firm has varying levels of tech capabilities and understanding – meaning your policies must be inclusive and clear enough to provide guidance for all team members, from the new college intern all the way to your C-suite.
Regarding the use of AI, your team will need to be cognizant of potential algorithmic biases that could disadvantage certain groups and establish parameters to mitigate them. For example, you may need to use a more diverse data set when training your generative AI system and implement bias detection algorithms to alert your team to potential issues.
Within your AI-focused procedures, it’s important to also include a mandatory human review and validation of anything generated or decided by AI, especially material that is client-facing or contains sensitive data. You may find it helpful to work with a compliance professional who understands the intersection of AI capabilities and compliance concerns.
2. Establish Robust Data Security Measures
Your clients trust in your ability to safeguard their most sensitive data. As you incorporate more AI functionality into your practice, you’ll need to take proactive measures to protect that data against unauthorized access, misuse, and cyber-attacks.
Corporate policies should cover important data privacy procedures such as:
- How to collect data safely
- Best practices for storing data
- How data can be used
- How to limit access to data as needed
Standard cybersecurity measures, such as encryption protocols, two-factor authentication, and up-to-date antivirus software are par for the course in keeping your data safe.
3. Implement Ongoing Training Requirements
With how quickly technology is evolving, it can feel like your policies become outdated almost as soon as they’re implemented. Help your team stay informed about ongoing changes and educate them about the risks involved with AI, so they can better work to protect sensitive client data in their day-to-day operations.
Don’t assume that one walkthrough of your policies will be enough to bring everyone up to speed. AI algorithms, machine learning, and data security are complex topics – especially for team members who may have trouble adapting to new technology.
Beyond annual compliance reviews, it’s a good idea to offer regular employee training sessions on AI and other tech innovations, plus provide additional resources personnel can refer to in between trainings.
4. Encourage Collaboration and Transparency
If your firm doesn’t already prioritize fostering a culture of compliance, now is the time to do so. Information silos can lead to security risks, data exposure, and a lack of policy follow-through. Not only can this create vulnerabilities within your firm, but it can compromise your clients’ data and create compliance risks.
Instead, encourage communication across various teams and offices. For example, you may need to collaborate with your IT, compliance, and legal teams when establishing and implementing AI-focused compliance policies.
5. Monitor and Audit the Effectiveness of Your Policies
As with other compliance topics, it’s important to continuously monitor the effectiveness of your policies relating to AI usage and data privacy.
Again, technology evolves quickly, and it’s possible that what works today may become outdated a few months from now. Regularly assess your efforts, review compliance changes or updates, and make adjustments as necessary.
Trust and security are integral to being an effective partner for your clients. As you continue to find new ways to implement AI into your firm, you’ll need to keep data privacy, cybersecurity, and client confidentiality top of mind – and these five best practices are a great place to start.
Feel Confident in Your AI Compliance with COMPLY
Leverage the powerful tools, resources, and expertise of COMPLY’s platform and team of compliance professionals to build your tech-focused compliance procedures. Schedule your free demo today to get started.