Addressing AI in the Annual Compliance Review

Artificial intelligence (AI) is rapidly transforming the asset management industry. In this brief video, Akin investment management partner Brian T. Daly discusses the importance of incorporating AI into your annual compliance review. 

Transcript

When it comes to artificial intelligence, every GC and every CCO is playing catch-up. Luckily, it's just about the time of year for most of you to start preparing for your annual compliance review.

So to address AI in your annual review, we recommend you include these three concepts:

• First, focus on security and privacy. Sit down with your CTO, sit down with your CISO if you have one, and look over your network architecture. Identify all those opportunities for your personnel to share, or for licensed AI products to access, your confidential firm, client or investor information and make sure you have those locked down.
• Second, when you're doing interviews with your investment personnel or with your operations personnel, ask them what they're using AI for and, more importantly, what others (including counterparties) are using AI for. Engage with them in a discussion about what risks are created or highlighted by that usage and, more importantly, where your existing control framework comes up short.
• Third, focus on the future. It is the case that everyone else is doing it. It is the case they're going to continue using AI, so use this as the opportunity to get the rest of your management committee to invest you with the power to improve, modify, or deny future AI use cases.

Finally, be flexible. The technology will change. It'll be different next year, next month, next week. Your response should be just as fluid and just as reactive.