Commissioner Kristin N. Johnson’s Opening Remarks at GAIM Ops AI Summit

Good afternoon and welcome to the AI Summit. Today, we will delve into essential topics concerning data quality, security, good governance for AI, critical third-party service providers, and the integration of generative AI in various aspects of market operations. One critical aspect we will focus on is how AI can be utilized to combat cybersecurity and fraud risks in our markets.

The integration of AI in our markets has raised concerns about cybersecurity and fraud risks that can stem from sophisticated AI models. These models have the capacity to produce high-quality synthetic content, making them potential targets for cyber intrusion campaigns. While we are aware of these threats, the full potential of AI to counter cyber and fraud risks has not been thoroughly explored. It is essential to examine how we can leverage AI to mitigate these threats effectively.

In recent years, there has been a rise in cyber and fraud threats carried out using AI technologies. Some of these technologies can serve as essential tools for offensive and defensive purposes, highlighting the importance of developing cyber resilience strategies. As we navigate the complex world of AI, it is crucial to identify pathways to good AI governance and best practices for firms operating in the financial ecosystem.

The financial markets have witnessed the transformative power of AI in enhancing efficiencies, reducing costs, analyzing vast amounts of data, and granting personalized access to markets. While many firms have embraced AI to streamline operations and comply with regulatory requirements, there are variations in the maturity of AI deployment across institutions. Firms have begun to incorporate AI into their cybersecurity and fraud threat assessments, but this integration may inadvertently introduce vulnerabilities.

On the positive side, AI has become a valuable tool in addressing these vulnerabilities. Machine learning and generative AI have the potential to enhance fraud and cyber detection, offering new insights to firms on improving their security measures. The U.S. Commodity Futures Trading Commission (CFTC) plays a vital role in addressing these issues, with a focus on market integrity, risk management, and enhancing market stability in global derivatives markets.

As someone with experience in legal practice and public service, I understand the importance of staying vigilant against fraud and cyber threats. Algorithmic models with AI capabilities have long been part of the financial services landscape, aiding in regulatory surveillance and compliance monitoring. The increasing integration of predictive technologies underscores the need for proactive measures to combat emerging threats.

In light of the evolving landscape of AI applications, the CFTC issued a request for comment in 2024 to gather insights on AI usage in regulated markets. This initiative demonstrates a collaborative effort between the Commission and market participants to harness the benefits of AI while mitigating potential risks. By fostering dialogue and understanding, we can collectively enhance market integrity and cybersecurity.

In conclusion, the rise of AI-fueled cyber and fraud threats necessitates a proactive approach to safeguarding financial markets. By leveraging the capabilities of AI and embracing best practices in governance, firms can strengthen their defenses against emerging risks. As we navigate the evolving landscape of AI integration, collaboration between regulatory bodies and market participants is key to ensuring a resilient and secure financial ecosystem.