The request for information, released Thursday, asks for comments on advancements in existing AI tools and on emerging AI technologies that can benefit the financial sector. The RFI has specific callouts for information on the use of AI in financial products and services, risk management, capital markets, internal operations, customer service, marketing and regulatory compliance. 

“Treasury is proud to be playing a key role in spurring responsible innovation, especially in relation to AI and financial institutions. Our ongoing stakeholder engagement allows us to improve our understanding of AI in financial services,” Under Secretary for Domestic Finance Nellie Liang said in a statement. “The Biden administration is committed to fostering innovation in the financial sector while ensuring that we protect consumers, investors, and our financial system from risks that new technologies pose.”

Treasury listed 19 questions, plus numerous follow-ups, for respondents within its RFI, including: asking for feedback on any AI models that financial institutions are currently using; whether AI use cases differ within institutions; what barriers small banks face in AI deployment; how AI has benefited low-to-moderate income consumers and/or underserved individuals and communities; the extent to which AI models are developed in-house, by third parties or via open-source code; and how industry is applying risk management frameworks to AI use.

During remarks Thursday at the Financial Stability Oversight Council Conference on Artificial Intelligence and Financial Stability in Washington, D.C., Treasury Secretary Janet Yellen touted the release of the RFI as a way of “continuing our stakeholder engagement to improve our understanding of AI in financial services.” Yellen also announced a future roundtable discussion, convened by Treasury’s Federal Insurance Office, on the benefits and challenges of AI use for insurers. 

“FSOC will continue its efforts to monitor AI’s impact on financial stability, facilitate the exchange of information, and promote dialogue among financial regulators,” Yellen said. “Given how quickly AI technology is developing, with fast-evolving potential use cases for financial firms and market participants, scenario analysis could help regulators and firms identify potential future vulnerabilities and inform what we can do to enhance resilience.”

Much of Treasury’s RFI is informed by the agency’s previous work on AI, including a March report that sounded the alarm on AI-specific cybersecurity risks to the financial sector. Just last month, the department issued a national strategy for combating terrorism and other illicit financing, which called out the benefits AI might have in winning that fight.

Closer to home, Treasury has experimented with its own AI use cases, while also engaging in public-private partnerships to ensure that smaller financial institutions have the same defensive AI capabilities as the country’s biggest banks. 

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The initiative was first announced as part of Treasury’s Financial Services Sector’s Adoption of Cloud Services report released in February and the new group aims to address difficulties associated with the increasing trend of cloud adoption identified in the report.

“This unprecedented collaboration among financial regulators and the private sector will bring thoughtful and lasting solutions to the cloud-based opportunities and challenges Treasury has identified,” said Deputy Treasury Secretary Wally Adeyemo in a statement. “American consumers and financial institutions will benefit from these cloud adoption efforts for years to come.”

The CESG will report to the Financial Stability Oversight Council (FSOC), Financial and Banking Information Infrastructure Committee (FBIIC), and the Financial Services Sector Coordinating Council (FSSCC).

The Co-Chairs of CESG are: Treasury Assistant Secretary for Financial Institutions, Graham Steele; Acting Comptroller of the Currency, Michael Hsu; Director of Consumer Financial Protection Bureau (CPFB), Rohit Chopra; Chief Executive Officer of PNC Financial Services, Bill Demchak; and Chair of Financial Services Sector Coordinating Council and Chief Security Officer of Mastercard, Ron Green.

The key objectives of the CESG include: documenting effective practices for cloud third-party risk; developing a “best practices” document for institutions considering “all in” or hybrid cloud adoption strategies; improving transparency and monitoring of cloud services for better “Security by Design,” establishing a common set of terms and definitions that can be used by financial institutions and regulators and determining if existing authorities for cloud service provider oversight are sufficient and account for systemic risks.

The Treasury Department will provide regular updates to the FSOC and FBIIC senior leaders in the coming months to ensure alignment in cloud adoption across the financial regulatory community. 

Treasury will also issue public updates on this effort on a rolling basis as updates are available on the multiple projects.

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In a report issued Wednesday, the FDIC’s Office of Inspector General identified major deficiencies in the agency’s IT and cyber risk assessment program, which is known as InTREx.

Cyberattacks pose a major threat to banks because the disruption or degradation of systems, or unauthorized alteration of information, can substantially alter the risk profile of a financial institution.

The FDIC is the independent government agency responsible for monitoring the health of commercial banks and savings banks across the U.S. In its report, the organizations’s watchdog found that information used in InTREx was outdated, and that in some cases agency examiners were not completing tests.

In addition, the study found that staff were not being kept abreast of latest cyberthreat updates, and that no training for examiners was offered to reinforce InTREx procedures. According to the OIG, unclear procedures have also led to InTREx examiners failing to file exam work papers properly.

After carrying out its assessment, the FDIC watchdog has recommended the agency take 19 steps to remedy its concerns with the program. The FDIC has said it will carry out 14 of the 19 recommendations by the end of this year, but the watchdog says that actions taken by the agency to address its remaining five concerns have not been sufficient.

Last year, the FDIC’s then-CIO Sultan Meghji resigned from his post at the agency, and outlined his rationale for leaving in a blistering Op-Ed published by Bloomberg News. He said that he received resistance from staff at the agency in response modernization efforts such as ending the use of fax machines and physical mail, and criticized the knowledge and open-mindedness of staff.

The latest report comes amid a wider debate about how private sector entities are held to account for poor cybersecurity practices. In an Op-Ed published in Foreign Affairs on Wednesday, Cybersecurity and Infrastructure Security Agency Chief Jen Easterly called on the commercial sector to work to ensure that strong cybersecurity is the cornerstone of every product, and to elevate cybersecurity to a board-level concern.

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Aeyon, which has worked as a contractor for the Defense Department and civilian agencies related to financial management and tech modernization, will work with seven of the ten NASA centers during a contract period of up to eight years.

“This milestone contract affirms that agencies continue to turn to Aeyon for our ability to unlock financial management efficiencies at scale by standardizing key processes, consolidating financial contracts and ensuring auditability,” said Sunny Singh, President and CEO of Aeyon.

The NFSS contract is part of a multi-year initiative to streamline NASA’s procurement of its product service lines.

The indefinite-delivery/indefinite-quantity (IDIQ) contract was awarded by NASA to MM Technologies, a joint venture between Aeyon company Manufacturing Technical Solutions and Virginia-based small business MDW, Aeyon said in a statement last week.

The NFSS contract will be managed out of the Marshall Space Flight Center in Huntsville, Alabama. The contract began on December 1st with a 90-day phase-in period, followed by a two-year base period, and three two-year option periods. 

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Purohit on Oct. 9 replaced Julie Berarducci, who has left federal government service. 

The FDIC regulates banks and savings associations and guarantees consumers’ deposits.

The permanent deputy CIO for Technology and CTO is Bob De Luca, who is currently on military duty and will return to the FDIC in February 2023.

Prior to the reshuffle in October, Purohit was the CIOO’s permanent Deputy Director for the Infrastructure Operations and Service Branch (IOSB) and will return to that position upon De Luca’s return next year.

Prior to the IOSB, where he has served for over 15 years, Purohit served as the assistant director and acting CTO at the Securities and Exchange Commission for 11 years.

Last month, the FDIC also named Chezian Sivagnanam as section chief for IT architecture and design within the agency’s chief information officer organization.

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In a statement the Office of the Comptroller of the Currency (OCC) said it will set up the new department to ensure it has the tools to supervise the fast-changing banking sector, including fintech companies.

Acting Comptroller of the Currency Michael Hsu said: “Financial technology is changing rapidly and bank-fintech partnerships are likely to continue growing in number and complexity. To ensure that the federal banking system is safe, sound, and fair today and well into the future, we need to have a deep understanding of financial technology and the financial technology landscape.”

He added: “The establishment of this office will enable us to be more agile and to promote responsible innovation, consistent with our mission.”

The new office will be led by a chief financial technology officer, who will be a deputy comptroller, reporting to the senior deputy comptroller for bank supervision policy. 

OCC is an independent bureau within the Treasury Department that is tasked with chartering, regulating, and supervising all national banks, foreign banks and savings associations in the United States, which together hold more than $15 trillion in assets.

OCC was established by President Lincoln in 1863 during the American Civil War.

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Speaking to FedScoop, Brian Whittaker said the Federal Deposit Insurance Corp. (FDIC) will reorient itself to become better prepared internally to supervise fintech companies, and other new tech entities in the financial services sector. The comments from the recently installed technology leader come as the agency moves ahead with the relaunch of its innovation lab.

“We now have less of an outward focus on policy and instead more about how do we modernize the FDIC to be prepared to receive crypto currency and adopt new technologies. We want to be familiar with the technologies so we’re not caught on the back foot when crypto and others hit in a bigger fashion,” Whittaker said during a Nava Public Benefit Corporation event on Thursday.

“Now our focus is on how do we improve CIOs capacity to deliver for business units. How do we test out blockchain ledger technology. How do we make sure FDIC is prepared for the direction that fintechs are going in financial services?” Whittaker added.

Whittaker, who is the former acting executive director of 18F, the digital services consulting group situated within the General Services Administration, took over as FDIC’s chief innovation officer in March.

Whittaker’s predecessor at the agency, Sultan Meghji resigned from the post earlier this year and dismissed the FDIC as “hesitant and hostile” to technological change in a blistering op-ed published by Bloomberg News in February.

According to Meghji, he received resistance from staff in response to basic modernization efforts such as ending the use of fax machines and physical mail. In the op-ed, Meghji also criticized the knowledge and open-mindedness of staff.

Whittaker added that he plans to take his time getting to know and gain the trust of staff within the agency before pushing for change in areas like robotic process automation (RPA) in order to increase capacity from manual processes. 

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“From a business and management stand point, automation would be a game-changer,” Chief Financial Officer Mary Comans said Wednesday during the IBM Think Gov digital event, produced by FedScoop.

FEMA awards many types of grants, including emergency preparedness funds to state, local, tribal and territorial governments. Automating detail-oriented and medial tasks away from manual labor would help the government respond to crises such as the coronavirus pandemic and major storms. The summer only gets busier for the agency after hurricane season begins June 1.

RPA bots could help free up time for FEMA workers to concentrate on more critical decisions, Comans said.

The pandemic presents unique challenges to FEMA, both internally and externally. With emergency declarations covering the country and FEMA coordinating with 40 other federal agencies, moving to maximum telework only added to the agency’s challenges, she said. With employees out of the office, automating some of their work would alleviate strained resources.

Comans said her primary responsibility was the “health and safety of the workforce.” While RPA bots won’t solve everything, she said being able to automate more tasks would be extremely helpful in the agency’s modernization journey.

“The field of emergency management needs to evolve,” she said.

Among the ideas for bots are validating upfront eligibility for grant recipients or streamlining the process for assigning funding. Automation also would catch any accidental overpayments or payments to the wrong organization, Comans said.

“We need to ensure that at the end of the day every dollar goes to the survivor that needs it,” she said.

Other agencies, like the General Services Administration, have also turned to bots as a coronavirus-response tool. One of GSA’s RPAs compiled infection data from countries where federal buildings are located. The data helped inform the government’s situational awareness and the potential risk of infection for federal workers.

Groups like the Defense Innovation Unit have also prioritized automation technology more broadly, seeking machine learning solutions to advance the complexity of the tasks bots can do.

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The Financial Transparency Act would see eight regulators adopt data collection and dispersion standards for the information they collect, including a move to electronic forms.

Data would be made electronically searchable and downloadable in bulk without license restrictions.

A common data structure would streamline agencies’ ability to garner insights from their information, said Hudson Hollister — founder of HData and before that the Data Coalition — at the Data Driven Government event on Wednesday.

“The reason why that is huge is that this means we turbocharge the power of the analytics that regulators can deploy in order to protect their constituencies, in order to enforce their rules, in order to do their jobs,” Hollister said.

The problem of entity identification — identifying relationships between data — when datasets are dirty would no longer be a problem in financial regulation if the bill passes, he added.

Improving data accuracy will also enable the development of regulatory technology, or RegTech, and artificial intelligence applications, said Craig Clay, a president at risk and compliance solutions company DFIN, in a statement.

All eight financial regulators within the Financial Stability Oversight Council would be affected: the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, Office of the Comptroller of the Currency, Securities and Exchange Commission, and the Treasury Department.

“The benefits of applying data standards to financial regulatory information as proposed by this legislation are clear: reduced compliance costs for businesses, better information for investors, and a more efficient regulatory oversight system that can effectively identify and address bad actors,” said Nick Hart, CEO of the Data Coalition, in a statement.

Rep. Carolyn Maloney, D-N.Y., who chairs the subcommittee on investor protection, and Rep. Patrick McHenry, R-N.C., ranking member of the main committee, reintroduced the legislation.

Maloney said the bill would “bring financial reporting into the 21st century,” in the announcement.

“Technology plays a key role in how Americans pay bills, save for a home, or even start a new business — it just makes sense for financial regulators to use that same technology to make public data more easily accessible,” McHenry said in a statement.

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A recent solicitation seeks information on financial management systems that could track funding past, present and future for the Department of Defense’s unified cybersecurity arm.

The system Cyber Command is looking for would be extensive, with requirements ranging from managing civilian pay to budget estimates. Cyber Command expects the end product to be a commercial, single-source effort with various modules that can meet the requirements, according to the RFI.

The system will have a “fixed baseline” with templates that can be adapted throughout the lifetime of the system to fit evolving needs. Cyber Command wants its existing Enterprise Cross Domain Solution to stay in place and work with the new system. The current environment involves multiple parties within the command and does not provide a mechanism to automate or otherwise enhance task completion, something the command hopes can be changed, according to the RFI.

With a new system, Cyber Command hopes to be able to search a common database, submit funding requests, display status logs and run data reports and analytics, according to the RFI.

Beyond software and material solutions to cyber command’s financial management, process mapping and workflow evaluations are expected. The request outlines a “Cradle-to-Grave” review that a private industry partner would carry out to evaluate Cyber Command’s financial management.

Responses to the RFI could lead to one-on-one meetings with private industry groups. The window for responses closes July 30.

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