Global Trustee and Fiduciary Services Bite-Sized Issue 9 2024

AI HKMA Circular on Consumer Protection in Respect of Use of GenAI On 19 August 2024, the Hong Kong Monetary Authority (HKMA) issued a circular to provide authorised institutions with a set of guiding principles in respect of use of generative artificial intelligence (GenAI) in customer-facing applications from a consumer protection perspective. The HKMA says that in view of the development of big data analytics and artificial intelligence (BDAI), it issued a set of guiding principles in the circular “Consumer Protection in respect of Use of Big Data Analytics and Artificial Intelligence by Authorised Institutions” dated 5 November 2019 (2019 BDAI Guiding Principles), focusing on four major areas: • Governance and accountability; • Fairness; • Transparency and disclosure; and • Data privacy and protection. HKMA states that these guiding principles have demonstrated to be beneficial to banks and customers and helped promote the healthy development of BDAI in the Hong Kong banking sector, as seen in the proliferation of use cases of BDAI revealed in a recent survey conducted by the HKMA. More importantly, the 2019 BDAI Guiding Principles have also helped enhance customer confidence in using banking services adopting BDAI. The HKMA notes, in recent months, an increasing interest of the banking sector in adopting GenAI in their operations. At this moment, adoption of GenAI in the banking sector is still at an early stage, with most of the current applications focusing on improving banks’ operational efficiency, such as internal chatbots and coding. Nonetheless, the HKMA says in the circular that the ability of GenAI in content-creation means that GenAI could be more extensively adopted by the banking sector in customer facing activities, and that the use of GenAI in customer-facing activities will have consumer protection implications. The HKMA states that GenAI, being a subfield of BDAI, basically shares a set of similar risk dimensions. As such, with respect to consumer protection in customer-facing applications, the HKMA expects all authorised institutions to apply and extend the 2019 BDAI Guiding Principles to the use of GenAI and continue to adopt a risk-based approach commensuratewith the risks involved. The HKMA says that since GenAI uses complex models, potential risks such as lack of explainability and hallucination (i.e. generating outputs that seem realistic but are factually incorrect, incomplete, lack important information, or lack relevance to the context) could cause even more significant impact on customers. The HKMA has therefore set out additional principles under each of the four major areas aiming to ensure appropriate safeguards for consumer protection are in place when GenAI is adopted for customer-facing applications. Link to HKMA Circular here Securities Services Bite-Sized Global Trustee and Fiduciary Services QUICK LINKS Issue 9 | 2024 AI DORA FUND LIQUIDITY MIFID II/MIFIR SUSTAINABLE FINANCE/ ESG TOKENISATION AUSTRALIA ASIA EUROPE NORTH AMERICA UNITED KINGDOM