The Central Bank has issued a guidance note on consumer protection and ensuring the responsible use of artificial intelligence by licensed financial institutions operating in the country. This step reflects its proactive supervisory approach and its alignment with the rapid developments in digital transformation and smart financial services. The guidance aims to establish a clear framework that directs financial institutions to employ these technologies in a safe and responsible manner. It outlines a set of fundamental principles that serve as a reference for the optimal use of these technologies, including governance and accountability, fairness and bias mitigation, transparency and avoiding opacity, and effective human oversight, alongside data protection and privacy requirements. The Central Bank emphasized that decisions made or supported by AI must be compatible with the duty to act with integrity, fairness, and in the best interests of consumers. It stressed that the level of human intervention must be proportionate to the level of potential risks to the consumer, and consumers have the right to request a human review or explanation for AI-generated decisions, with alternative arrangements to be provided if a consumer refuses to comply with an automated decision. Clear and accessible channels for complaints must be maintained, processed efficiently, confidentially, and within a reasonable timeframe. Furthermore, AI must not be used to target customers with unsuitable products, aggressive sales tactics, or misleading marketing. The Central Bank confirmed that when relying on external service providers or cloud service providers, due diligence must be conducted on governance, security, and data protection, ensuring contractual clauses allow for audit rights, information access, and compliance with the Central Bank's requirements. The justification for selecting a provider must be documented, and independent annual cybersecurity reviews must be conducted, maintaining a record of all models, including those hosted by third parties. Excessive reliance on a single provider should be avoided if possible. In a statement yesterday, the Central Bank said it issued a guidance note on consumer protection and ensuring the responsible use of artificial intelligence and machine learning technologies by licensed financial institutions in the country, reflecting its proactive supervisory approach and its alignment with the rapid developments in digital transformation and smart financial services. The guidance aims to establish a clear framework that directs financial institutions to employ these technologies in a safe and responsible manner. The guidance defines a set of fundamental principles that serve as a reference for the optimal use of these technologies, including governance and accountability, fairness and bias mitigation, transparency and avoiding opacity, and effective human oversight, alongside data protection and privacy requirements. The guidance also includes provisions related to consumer disclosures, ensuring clarity of information provided in both Arabic and English, and providing appropriate options to object or opt out in cases of high-impact automated decisions. The Governor of the Central Bank, Khaled Mohamed Al Hameli, stated: 'The objective of the guidance note is to establish a clear framework for the responsible use of artificial intelligence and machine learning technologies in the financial sector, which enhances consumer protection and reinforces the principles of governance and transparency, while emphasizing the importance of human oversight and data protection requirements.' An expert in administrative sciences and information technology at J&K, Asim Jalal, stated that 'excessive personalization' in AI is not in the customer's interest. He explained that while AI plays a significant role in the banking sector, particularly in what is technically known as 'hyper-personalization,' it can also be used to pressure customers or market products in a way that benefits the bank rather than the customer. The Central Bank required that AI systems operate under effective human supervision, especially for impactful decisions. It added that the application of AI in the financial sector should not lead to discriminatory results, and banks must ensure their AI systems are under effective human supervision, particularly for impactful decisions. The Central Bank defined a 'high-impact decision' as any decision made using AI that materially affects a customer's access to a financial product or service, such as loan approval or an insurance claim. It added that the board of directors and senior management bear full responsibility for AI systems and their outcomes, including the selection, development, deployment, and accountability for them, and must provide periodic reports to senior management and boards of directors covering performance and risks. It added that boards of directors and senior management must ensure that risk committees and control functions (such as compliance, internal audit, and risk management) understand AI-driven operations and are capable of reviewing and challenging outcomes when necessary. The adoption, deployment, and use of AI should be considered an integral part of the risk management framework, and a record (inventory) of all AI models, systems, or technologies must be maintained. AI deployment must reflect the institution's ethical standards and code of conduct.
