Abstract
The emergence of artificial intelligence (AI) is a significant development in the history of technology. This cutting-edge technology is ushering in new frontiers and business paradigm shifts around the world, including South Africa. The development and application of AI has benefited every sector of the South African economy, and the financial services industry is no exception. As the development of diverse AI algorithms and models increases, the regulation of this technology has become essential for maximising its potential benefits. This dissertation focuses on the need for the regulation of AI in the South African financial services industry.
In the study, a general introduction into the background of the financial services industry and the impact of technology in the industry were discussed. This was to provide an overview of what the financial services industry consists of, and the importance of the industry to the global economy as well as in South Africa. The study highlighted the need for regulating AI by discussing the background, the rise, acceptability, and advancement of AI in the South African financial services industry. Furthermore, the dissertation sheds light on the various legislations in the financial services industry, the purpose of regulation, and the Act governing the financial system in South Africa. The aim of the study is to identify the existing policies, regulations, and laws, and if they can regulate the use of artificial intelligence and its models within the financial services industry. In achieving this aim, the objective of the study will be to conduct a review on AI legislation that may exist globally, and how that might be implemented in South Africa. A qualitative research method that involves the content analysis methodology was used to conduct this research.
One of the findings of this research is that the data privacy law and the Protection of Personal Information (POPI) Act are already in place to protect user data, but other existing laws like the Financial Advisory and Intermediary Services (FAIS) Act within the industry, are inadequate to address AI risks. Therefore, recommendations have been made regarding the need for AI laws or a review of existing laws to account for the threats posed by AI. In addition, the study addressed the AI policy framework and the ethical criteria of some developed countries and organisations. It is important to mention that at
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the time of writing, there had not been enough research conducted in South Africa on this topic. Therefore, this dissertation will contribute to the body of knowledge in the area of AI regulation.
In conclusion, regulatory agencies, organisations, and government have significant roles to play in advocating for the creation of an AI regulatory framework and laws. By enacting laws, the government will safeguard individuals against data and information exploitation and assist to mitigate the negative consequences of job losses through safety nets and skills development. A robust AI regulatory framework for the financial services industry will be one that can be applicable to the AI risks now and in the future.