You can see the rules and regulations in other jurisdictions.
The German Federal Financial Supervisory Authority (BaFin) has issued several statements on the following topics: big data, artificial intelligence (AI) and distributed ledger technology (DLT), digitalization and information security. Legislation on cryptocurrencies and cryptocurrencies and blockchain-based dematerialized securities speaks to the need for legal certainty for business innovation.1
"Wealthtech", an offshoot of fintech, helps manage wealth and personal finance. The fintech risk segment, where digital intelligence will be used, offers "digital cosplay" in AML/CFT. Based on a technology-neutral "same business, same risk, same regulation" approach, we can talk about the proper operation of business models that use AI. In order for a fintech business model to be used within the law, it must be analyzed. The use of AI in licensed institutions is only possible if all rules and regulatory requirements are met, such as: service definition and sustainability processes, internal control procedures and internal control systems, adequate contingency plans, especially for IT systems, and complete documentation of business operations to allow for BaFin controls, as well as compliance with outsourcing requirements. The business organization must comply with all regulatory rules for risk management in BaFin Circular No. 09/2017 and IT supervisory requirements in BaFin Circular No. 10/2017, in order to avoid risks. In this regard, we can expect further developments in the AI segment with the European Commission's proposal for a regulation establishing harmonized rules in the field of AI, which will be published in April 2021.2
BaFin has put forward its own rules for algorithms: there is no general authorization for their use, the administrative practice is technologically neutral. From the legal point of view, this approach implies risk, financial oversight, and lack of backing from the law. Oversight is exercised over the entire decision-making process. Compliance with the general requirements of proper business organization and risk management is necessary in this case. Since algorithms do not have the right to be approved, it is possible to use algorithms from the law, which does not exclude non-acceptance by the supervisor. Risk-based assessment will help to avoid these actions.3
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