Yellen to warn of 'significant risks' of AI in finance while acknowledging 'tremendous opportunities'

Treasury Secretary Janet Yellen is set to warn that using artificial intelligence in finance carries "significant risks" even as it benefits financial firms, according to excerpts of a speech she is expected to deliver Thursday.

Yellen goes on to explain in her prepared remarks that if too many market participants rely on the same AI models and data, as well as cloud service providers, it could reinforce existing biases or create new ones that impact decision-making in financial markets. "Concentration among vendors developing models, providing data, and providing cloud services may also introduce risks, which could amplify existing third-party provider risks.

Advances in natural language processing, image recognition, and generative AI, for example, create new opportunities to make financial services less costly and easier to access," Yellen says in the excerpts. The secretary also notes that the Internal Revenue Service is using AI for "enhanced fraud detection.

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