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CUs: Share insights on AI usage, beneficial ownership reporting
NAFCU Friday sent two new Regulatory Alerts to members breaking down the federal financial regulators' request for information (RFI) seeking insights into financial institutions' use of artificial intelligence (AI) and the Financial Crimes Enforcement Network's (FinCEN) advance notice of proposed rulemaking (ANPR) related to the implementation of the beneficial ownership information reporting provisions included in the Anti-Money Laundering Act (AMLA).
In the first Regulatory Alert, NAFCU noted that the federal financial regulators – including the NCUA – are seeking input on:
- how AI technologies are being used for consumer services and business purposes;
- whether the agencies should clarify any aspects concerning the use of management of AI to enable financial sector participants to deploy AI in a safe and sound manner and in compliance with consumer protection regulation; and
- how financial institutions are addressing changes associated with AI “explainability” – for example, the conceptual soundness of the underlying model – and what methods exist for validating the soundness of AI output.
The association highlighted that a clear regulatory framework for testing and validating AI could help level the playing field with larger banks and fintech companies – benefitting credit unions.
As more fintech companies take advantage of different strategies to sidestep financial regulation and enter the financial system as banks, NAFCU is leading efforts with regulators and lawmakers to ensure these fintech banks are operating under the same regulatory oversight as credit unions.
In addition, the Regulatory Alert poses questions for credit unions to consider when providing feedback on the agencies’ RFI. Comments are due to NAFCU May 14; comments are due to the NCUA June 1.
In the second Regulatory Alert, NAFCU broke down FinCEN’s ANPR seeking comment on how best to implement the FinCEN database – a secure, non-public database where required companies must report their beneficial ownership information.
NAFCU detailed how credit unions may be able to obtain beneficial ownership information from the FinCEN database with the consent of the reporting company. While the ANPR does not change any existing customer due diligence requirements or create any new requirements for credit unions, NAFCU explained that the information credit unions obtain from the database can only be used for customer due diligence purposes.
The AMLA, which was passed as part of the fiscal year 2021 National Defense Authorization Act, included NAFCU-sought language from the Corporate Transparency Act (CTA) to require corporations, limited liability companies, and similar entities to disclose their true beneficial ownership information to FinCEN to create a new nonpublic database. The association has a complimentary resource that breaks down key provisions of the act.
For more on FinCEN’s ANPR – including a section-by-section analysis – view the Regulatory Alert. Comments are due to NAFCU April 20; comments are due to FinCEN May 5. Subscribe to receive Regulatory Alerts.