Ian Johnston, the chief executive of Dubai Financial Services Authority. PHOTO PROVIDED TO CHINA DAILY
With the growing commercial use of Artificial Intelligence (AI), regulation aims to ensure that such technologies are used responsibly rather than to curb or limit innovation, said the head of a financial regulator in Dubai, the United Arab Emirates.
Ian Johnston, the chief executive of Dubai Financial Services Authority (DFSA), said global collaboration with consistent standards in this area is also crucial.
He told China Daily in late January that his agency adopts a more principles-based approach in supervising AI use, focusing more on regulating the outcome rather than the process.
According to Johnston, a third of firms in Dubai currently use AI to a material degree. "Some are using AI in a small way … but they all believe that they'll be increasingly using it."
He said that his agency gathered ideas from the industry about AI use, and at the moment, companies are using it in their back office work.
"Firms are using it to increase their productivity, improve their efficiency, for analyzing their data including customer data, market data," Johnston said, "They're also using AI in customer-facing roles, but that tends to be limited at the moment to customer support or chat boxes."
However, Johnston noted that firms have not yet used AI for decision-making to a great degree — for instance, he said, in terms of underwriting decisions or claims-paying for insurance firms.
"I think that will change as time goes on," he said.
As a regulator, he said that the DFSA's approach is not to stifle innovation but to ensure that AI is used responsibly.
"I'm not going to come up with a piece of regulation that says here's how we will regulate AI. That's not what we'll do," he explained.
"What we're much more likely to do is to take a principles-based approach and say to firms in your existing risk management frameworks, you need to take account of AI and the risks that the use of AI poses."
Johnston raised several questions for firms in Dubai regarding accountability for AI, ensuring that customers are treated fairly, and against cyber threats.
He said that these are all factors that financial institutions have already put in place to manage risks, such as treating customers fairly, proper governance and accountability.
"What we would be saying to the firms is, OK, if you're going to be using AI, tell us how you're managing the risks that it represents," he explained.
"For instance, the risk of customer bias if it discriminates against one customer compared to another? How are you making sure the customers are fairly treated, (and there is) proper accountability if something goes wrong?"
Johnston said firms must demonstrate to the DFSA their plan to address those risks.
"So, that means that it's much more likely that we build this into our existing risk management regulatory framework and for firms to address through it, rather than saying here's how we regulate AI itself," he said.
Their guidelines should indicate that it will focus on the outcomes rather than processes of AI use, he said.
"So we will say, if there's an impact on an outcome arrived at the cause of your use of AI, and that's a negative outcome, then we would take action in respect of that," he said, "But we won't so much take action in respect of how you use the technology."
Johnston thinks the approach is consistent with global thinking on AI use.
He noted that because Dubai remains an international financial center, its firms always explore cross-border business. Thus, the regulations in Dubai must be no different from Hong Kong, Singapore or Europe, he said.
"It's in the interest of markets and investors to have a consistent approach taken globally," Johnston added.
Johnston is also on the board of the International Organization of Securities Commissions (IOSCO), the global standard setter for securities and funds regulation. "We're doing work on AI at the IOSCO level and looking at the sort of risks at an international level," he said, "We will end up with some global standards that regulators can coalesce around and will be to the benefit of not just the regulations, but to the industry and investors."
He noted that within the Global Financial Innovation Network grouping of international financial services regulators, they share an understanding in respect of AI, innovation and fintech generally.
Johnston added that he thinks that as AI develops, it will improve customer accessibility and experience for businesses. "That's happening and being looked at across Asia-Pacific and the Middle East."
