Using AI to Manage the Corporate Transparency Act

The use of AI can provide significant benefits for the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in managing the Corporate Transparency Act (CTA). However, there are potential dangers and risks that need to be carefully addressed. AI models can perpetuate or amplify existing biases in the training data, leading to discriminatory outcomes or unfair treatment, undermining fairness and equity. Many AI models lack transparency and the true ability to explain, making it difficult to understand how decisions are made, raising concerns about accountability and due process. The sensitive personal and financial data required by the CTA could be vulnerable to breaches, misuse, or unauthorized access if AI systems handling this data are not properly secured.

There is also a risk of over-reliance on AI-powered systems, potentially eroding human oversight, critical thinking, and decision-making in enforcement actions and investigations. AI models can become outdated or less accurate over time due to model drift or decay, leading to erroneous decisions or missed risks. Malicious actors may attempt to manipulate or adversely influence the AI models through data poisoning or adversarial attacks. Additionally, the use of AI in law enforcement and regulatory contexts raises ethical and legal concerns related to privacy, due process, and civil liberties.

To mitigate these risks, FinCEN should adopt a comprehensive AI governance framework that includes robust data governance, model validation, bias testing, continuous monitoring, and human oversight. Transparency, explainability, and accountability measures should be implemented to ensure fairness, due process, and public trust in the agency’s use of AI for managing the CTA. By addressing these potential dangers, FinCEN can leverage the benefits of AI while mitigating the associated risks and upholding its regulatory responsibilities.