In a letter to the banks, as seen by Reuters, the Australian Securities and Investments Commission (ASIC) said it would conduct a review that would focus on new and proposed AI implementations by banks, and the impacts they may potentially have on customers.
While in May, ASIC had told banks to urgently work to deal with potential cyber risks from frontier AI, particularly following news that AI models are hacking companies and government agencies; in its latest letter it acknowledged that AI does have potential automation benefits for banks.
However, it wanted to ensure that decision-making and lending processes remained safe for customers.
“ASIC will review the use of AI in customer-facing activities and will review lender conduct practices, such as incentives, referrer arrangements and broker oversight. There will be an ongoing focus on banks getting the basics right and improving outcomes for those in financial difficulty,” ASIC wrote on its site.
ASIC said in its Report 798, Beware the gap: Governance arrangements in the face of AI from 2024, it found that while AI adoption in the financial services sector was increasing, governance and risk assessment, including for customers, had fallen behind.
“Since then, ASIC has continued to engage with banks on their AI use through supervisory engagements.”
ASIC said that in August, it had hosted nine roundtables covering 600 participants within the financial services sector and found that a key theme was how banks and boards deal with the rising threat of cyber incidents and AI-powered cyber attacks.
“The urgency of this challenge cannot be overstated. Threat actors are exploiting frontier AI models to identify and exploit vulnerabilities that previously may have taken a team of professionals months to find,” ASIC commissioner Simone Constant said.
“Now is the time to ensure you have a strong, tested plan to respond when the worst happens. Australia's financial system is only as resilient as its weakest link. Boards and executives must move beyond awareness and ensure their organisations have well-tested response plans and understand where they are vulnerable, so they can respond effectively under pressure.”
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