When it comes to AI, compliance and accountability are more than regulatory obligations - they are commitments to your accountholders' trust and the integrity of your financial institution.

So, what happens if you don't have robust AI governance and accountability structures in place? Consequences like regulatory penalties, potential biases in decision-making, and privacy breaches could harm your reputation and lead to financial losses. Alarmingly, a recent survey revealed that 55% of organizations haven't yet implemented an AI governance framework.

Now's the time to act - and these four keys will help you get started.

1. Establish Strong Structures

AI governance starts at the top.

Involve senior leaders who will champion the ethical and responsible use of AI across your financial institution. Set up a dedicated AI ethics committee, where leaders from IT, compliance, legal, and other departments can regularly review projects, define roles, and set standards for AI development and oversight. Assign a specific role to oversee the implementation of your AI guidelines and to integrate AI risk management into existing risk frameworks.

When everyone is on the same page and committed to ethical AI, your institution is better positioned to meet regulatory standards, reduce risk, and build trust. Ongoing training for staff can also help everyone stay current on best practices and evolving regulations.

2. Prioritize Transparency

Transparency is crucial to building trust with your accountholders and stakeholders.

Document all AI-driven decisions and make your data sources, algorithms, and model performance visible. This way, stakeholders can see exactly how your AI systems arrive at conclusions, reducing potential biases and showing the ethical safeguards you have in place.

Your AI ethics committee can arrange audits and coordinate system tests to confirm accuracy and integrity, while transparency reports can provide stakeholders with regular insights into AI performance and limitations. Encourage stakeholders to raise questions and address them promptly - showing that you're committed to honesty and accountability.

3. Ensure Legal Compliance

In banking, regulatory compliance is critical.

Align your AI policies with GDPR, PSD2, and other local and international standards that govern data protection and consumer rights. Regular data protection impact assessments (DPIAs) can identify and reduce risks, ensuring your AI systems are secure and transparent. Appoint a compliance lead to oversee these efforts, and work with your AI ethics committee to develop protocols for handling data breaches and addressing requests from data subjects.

When compliance is part of your culture, your financial institution gains a strong foundation for responsible AI use.

4. Set Internal Usage Standards

Protecting accountholder data means establishing strict internal standards.

Limit the use of sensitive information - like personally identifiable information (PII) and intellectual property - in your AI systems. Apply encryption and access controls to safeguard data and conduct regular audits to make sure these protections stay intact.
Educate your employees on data privacy and security best practices, so everyone knows their role in maintaining a secure, compliant environment.

When everyone plays their part, your AI initiatives are more likely to succeed.

Adapting AI Governance for Your Financial Institution

AI governance isn't one-size-fits-all, and it doesn't need to be overwhelming.

Start small, drawing from established frameworks that fit your institution's size and needs. For instance, the National Institute of Standards and Technology (NIST) offers an AI Risk Management Framework to help you address common AI risks, while the European Commission's Ethics Guidelines for Trustworthy AI focus on building lawful, ethical, and robust AI systems.

By taking these steps, your organization can confidently navigate the AI landscape, meeting compliance standards and building stronger relationships with your accountholders. But be prepared for change; regulations are proliferating at the global, national, state and even the municipal level. And many of these regulations conflict with one-another, so it is important to document your reasoning for selecting your framework positions.

Want to Broaden Your AI Knowledge?

For more insights on integrating AI responsibly, check out:
• Our blog post on " 7 Fundamentals for Building Your AI Risk Management Framework"
• Explore best practices in our eBook, Getting Started in AI: A Guide for Community and Regional Banks and Credit Unions