Singapore’s AI Model Risk Management Paper: Key Insights for Financial Institutions
On 5 December 2024, the Monetary Authority of Singapore (“MAS”) released the Artificial Intelligence Model Risk Management Paper (“AI MRM Paper”), which may be accessed here. The paper outlines the best practices carried out by banks and offers guidance to financial institutions (“FIs”) on managing AI-related risks, particularly in light of the growing adoption of Generative AI (“Gen AI”).
Background: Risks of AI
As FIs continue to leverage AI, certain risks may arise:
- Regulatory Risks: Non-compliance with regulations could lead to fines and enforcement actions (such as poor performance of AI to support anti-money laundering efforts).
- Operational Risks: Unexpected behaviour of AI could lead to errors in critical processes (such as automation of financial operations).
- Financial Risks: Inaccurate predictions may result in financial losses (such as fraud detection).
- Reputational Risks: Negative customer experiences or public backlash can harm a FIs reputation (such as biased or unethical…
