As the use of artificial intelligence is spreading, it is becoming a threat to financial markets. Several banks have already banned it.
Artificial intelligence (AI) systems could become as commonplace as computers and the Internet in the near future with the potential to improve education or medical care. As with any technology, however, it has a dark side.
Considering how easy it is to create and disseminate false information, it could severely disrupt financial markets.
Two-Faced Technology
Recently, US stocks fell briefly after a fake photo of an explosion near the Pentagon went viral on social media. This happened just a few months after OpenAI introduced ChatGPT.
Inaccurate information, or so-called confabulations, generated by AI models that refer to regulators, companies, or public figures can distort markets and lead to a number of ethical problems, as «Bloomberg Law» wrote, citing UBS analysts Annabel Willder, Victoria Kalb and Julie Hudson.
KYC Inadequacy
The report says it will become harder to distinguish between reality and so-called deepfakes. This could lead to the publication fake videos of executives providing incorrect information, false company statements being issued as well as communication from investors announcing adjustments to their holdings.
AI also facilitates the disclosure of intellectual property and trade secrets, as sensitive information is fed into such systems by users seeking to benefit from the technology's analytics, the report adds.
An example of this is sanctions lists, which can be easily manipulated. Banks can therefore by no means rely exclusively on AI to perform their know-your-customer (KYC) identification and verification processes and money laundering checks.
Bank Lockout
These risks and the global race to develop similar services have led many banks to restrict the use of generative AI programs. Earlier this year, companies such as Bank of America, Citigroup, Deutsche Bank, Goldman Sachs and Wells Fargo banned the use of the tool. J.P. Morgan restricted employees from use of the ChatGPT chatbot.
