Treasury official: Small financial institutions have \u2018growth to do\u2019 in using AI against threats | CyberScoop<\/title> <link rel=\"canonical\" href=\"https:\/\/cyberscoop.com\/treasury-department-ai-cyber-fraud-threats-small-banks\/\"> <meta property=\"og:locale\" content=\"en_US\"> <meta property=\"og:type\" content=\"article\"> <meta property=\"og:title\" content=\"Treasury official: Small financial institutions have \u2018growth to do\u2019 in using AI against threats\"> <meta property=\"og:description\" content=\"AI-specific fraud and cyber risks in the financial sector are especially pronounced for small banks, the agency\u2019s chief AI officer said.\"> <meta property=\"og:url\" content=\"https:\/\/cyberscoop.com\/treasury-department-ai-cyber-fraud-threats-small-banks\/\"> <meta property=\"og:site_name\" content=\"CyberScoop\"> <meta property=\"article:published_time\" content=\"2024-04-19T15:45:06+00:00\"> <meta property=\"article:modified_time\" 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name=\"msapplication-TileImage\" content=\"https:\/\/cyberscoop.com\/wp-content\/uploads\/sites\/3\/2023\/01\/cropped-cs_favicon-2.png?w=270\"> <\/head><body class=\"post-template-default single single-post postid-80208 single-format-standard\" id=\"readabilityBody\"> <a href=\"https:\/\/cyberscoop.com\/treasury-department-ai-cyber-fraud-threats-small-banks\/#main\" class=\"skip-to-content-link visually-hidden-focusable\">Skip to main content<\/a> <\/p>\n<div class=\"ad ad--top ad--top-desktop\">\n<div class=\"ad__inner\"> <span class=\"screen-reader-text\">Advertisement<\/span> <\/div>\n<\/div>\n<p> <main id=\"main\" role=\"main\" tabindex=\"-1\"> <\/p>\n<div class=\"ad ad--top ad--top-mobile\">\n<div class=\"ad__inner\"> <span class=\"screen-reader-text\">Advertisement<\/span> <\/div>\n<\/div>\n<section id=\"stickybar\" class=\"stickybar stickybar--newsletter js-stickybar\" readability=\"0.82\"> <button class=\"stickybar__close js-stickybar-close\" aria-controls=\"stickybar\"> <svg class=\"icon icon--close\" width=\"21\" height=\"22\" viewBox=\"0 0 21 22\" fill=\"none\"><path d=\"m.822.518-.805.805L9.695 11 .017 20.678l.805.805 9.678-9.678 9.677 9.678.806-.805L11.305 11l9.678-9.677-.806-.805-9.677 9.677L.822.518Z\" fill=\"currentColor\" \/><\/svg> <span class=\"visually-hidden\">Close<\/span> <\/button> <\/section>\n<article class=\"single-article content\">\n<div class=\"single-article__container js-single-article-content\">\n<header class=\"single-article__header \" readability=\"26.064356435644\">\n<div class=\"single-article__header-content\" readability=\"32.25\">\n<p> AI-specific fraud and cyber risks in the financial sector are especially pronounced for small banks, the agency\u2019s chief AI officer said. <\/p>\n<\/p><\/div>\n<div class=\"single-article__cover-wrap\">\n<figure class=\"single-article__cover\"> <img data-recalc-dims=\"1\" fetchpriority=\"high\" width=\"640\" height=\"427\" src=\"https:\/\/i0.wp.com\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats.jpg?resize=640%2C427&ssl=1\" class=\"single-article__cover-image wp-post-image\" alt decoding=\"async\" fetchpriority=\"high\" srcset=\"https:\/\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats-2.jpg 1024w, https:\/\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats-2.jpg?resize=300,200 300w, https:\/\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats-2.jpg?resize=768,512 768w, https:\/\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats-2.jpg?resize=600,400 600w, 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(Photo by J. David Ake\/Getty Images) <\/figcaption><\/figure>\n<\/p><\/div>\n<\/header>\n<div class=\"single-article__content\">\n<div class=\"single-article__content-inner has-drop-cap\"> <html readability=\"38.843783209352\"><body readability=\"78.688840684502\"><\/p>\n<p>Major financial institutions have used artificial intelligence to play increasingly stingy defense against fraud and cybersecurity threats over the past decade, a top Treasury Department official said Thursday. But \u201cthere\u2019s growth to do\u201d when it comes to deploying those same technologies for smaller banks.<\/p>\n<p>Todd Conklin, the Treasury Department\u2019s chief AI officer and deputy assistant secretary for the Office of Cybersecurity and Critical Infrastructure Protection, said during an American Bankers Association virtual event that the sector has done \u201cvery well\u201d to narrow the cybersecurity gap between large and small lenders. <\/p>\n<p>But though Conklin has seen a \u201csignificant reduction\u201d in fraud at some of the country\u2019s largest financial institutions thanks to AI, there\u2019s a concerted public-private effort now on \u201chow do we ensure that we\u2019re \u2026 leveraging the capabilities of our largest institutions and making sure that our smallest institutions have the same advantage from a defensive perspective.\u201d<\/p>\n<p>Protecting small financial institutions from AI-fueled threats was a primary topic of discussion during Thursday\u2019s press briefing featuring Conklin and two members of the Financial Services Sector Coordinating Council, which contributed to Treasury\u2019s March <a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Managing-Artificial-Intelligence-Specific-Cybersecurity-Risks-In-The-Financial-Services-Sector.pdf\">report<\/a> on <a href=\"https:\/\/cyberscoop.com\/treasury-report-cyber-risks-ai-tools\/\">managing AI-specific cyber risks<\/a> in the financial services sector.<\/p>\n<div class=\"ad ad--inline_1 \">\n<div class=\"ad__inner\"> <span class=\"screen-reader-text\">Advertisement<\/span> <\/div>\n<\/div>\n<p>Paul Benda, vice chair of the FSSCC and executive vice president of fraud, risk and cybersecurity at the ABA, said the focus of current and future public-private financial sector coalitions will be to \u201cfigure out ways to provide more data and better training systems\u201d to smaller institutions. <\/p>\n<p>\u201cBy their nature, small institutions simply don\u2019t have the same volume of data to train their systems on,\u201d Benda said. \u201cThey may not have access to some [of the] same high-end technical systems that some of the larger institutions have. \u2026 Can we take those lessons learned from those larger institutions that are more leaning forward, that have sandboxes they can play in to test out these capabilities, and extend those to small institutions?\u201d<\/p>\n<p>At least some of the dozens of financial institutions interviewed as part of last month\u2019s Treasury report raised \u201csignificant concerns about the data used to train commercial generative AI because of privacy and liability concerns.\u201d A potential solution floated by representatives from those participating banks would be a \u201cstandardized description, similar to a nutrition label, for vendor-provided generative AI systems to clearly identify what data was used to train a model, where it came from, and how any data submitted to the model will be incorporated.\u201d<\/p>\n<p>Debbie Guild, the FSSCC chair and head of enterprise technology & security at PNC Financial Services Group, acknowledged during Thursday\u2019s call that nutrition labels won\u2019t \u201cbe something that everybody will care about.\u201d But there is plenty of value for financial institutions large and small to be transparent about when an AI model \u201cstopped being trained\u201d given the decision-making that revolves around those outputs, she said.<\/p>\n<p>Conklin added that nutrition labels will be \u201creally significant\u201d for small financial institutions given their reliance on third-party data sources \u201cto meet the level of explainability that\u2019s going to be required of them by the <a href=\"https:\/\/www.leiroc.org\/\">Regulatory Oversight Committee<\/a>,\u201d an international body of more than 65 markets regulators and other public officials from 50-plus countries. <\/p>\n<div class=\"ad ad--inline_1 \">\n<div class=\"ad__inner\"> <span class=\"screen-reader-text\">Advertisement<\/span> <\/div>\n<\/div>\n<p>Treasury and the FSSCC, meanwhile, have enlisted \u201cmultiple core providers\u201d \u2014 makers of software used by banks to manage processes \u2014 in discussions on how best to adopt and apply AI to financial services, Conklin said. <\/p>\n<p>Those third-party services \u201chave a significant role to play as does, frankly, the U.S. Treasury Department, in terms of making sure we\u2019re working in lockstep with our sector partners to try to close the gap between our largest and smallest institutions,\u201d he added. \u201cWe\u2019re going to definitely try to encourage as much innovation in that space as reasonably possible.\u201d<\/p>\n<p><\/body> <\/p>\n<footer class=\"single-article__footer\" readability=\"4.3873873873874\">\n<div class=\"author-card\" readability=\"15\">\n<div class=\"author-card__avatar\">\n<figure class=\"author-card__image-wrap\"> <img data-recalc-dims=\"1\" decoding=\"async\" class=\"author-card__image\" src=\"https:\/\/i0.wp.com\/ddi.mohflo.net\/wp-content\/uploads\/2024\/04\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats-1.jpg?w=640&ssl=1\" alt=\"Matt Bracken\"> <\/figure>\n<\/p><\/div>\n<p><h4 class=\"author-card__name\">Written by Matt Bracken<\/h4>\n<p> Matt Bracken is the managing editor of FedScoop and CyberScoop, overseeing coverage of federal government technology policy and cybersecurity. Before joining Scoop News Group in 2023, Matt was a senior editor at Morning Consult, leading data-driven coverage of tech, finance, health and energy. He previously worked in various editorial roles at The Baltimore Sun and the Arizona Daily Star. 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{"id":3185,"date":"2024-04-19T10:45:06","date_gmt":"2024-04-19T15:45:06","guid":{"rendered":"https:\/\/cyberscoop.com\/?p=80208"},"modified":"2024-04-19T10:45:06","modified_gmt":"2024-04-19T15:45:06","slug":"treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats","status":"publish","type":"post","link":"https:\/\/ddi.mohflo.net\/index.php\/2024\/04\/19\/treasury-official-small-financial-institutions-have-growth-to-do-in-using-ai-against-threats\/","title":{"rendered":"Treasury official: Small financial institutions have \u2018growth to do\u2019 in using AI against threats"},"content":{"rendered":"