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Regulators Crack Down on 'AI Washing'

Regulators Crack Down on 'AI Washing'

May 14, 2024

Regulators Crack Down on 'AI Washing'

A surge in the number of UK companies promoting their use of artificial intelligence (AI) in communications to shareholders has caught the attention of regulators. The phenomenon, known as "AI washing," involves businesses overstating their engagement with AI technology to create a "halo effect" and potentially inflate their stock prices. Amid this trend, regulatory bodies are intensifying their scrutiny and taking action against misleading claims.

Recent research by Bowmore Financial Planning indicates a 75% increase in AI-related statements from UK companies in the past year, with figures rising from 320 to 560. Well-known companies such as BP, Aviva, Hiscox, Marks and Spencer, and 888 Holdings have all made announcements highlighting their use of AI, although none have been accused of AI washing.

The US Federal Trade Commission (FTC) issued a warning in February of the previous year about the emergence of fake AI claims in advertising and marketing materials. This was followed by the US Securities and Exchange Commission (SEC) taking action against two investment advisers, Delphia and Global Predictions, two months ago for misleading AI claims. The firms settled the charges by paying $400,000 without admitting or denying the findings.

SEC Chair Gary Gensler commented on the trend, stating, "Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors."

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