Swiss regulator FINMA deploys AI to police crypto markets as cybersecurity threats intensify

Financial regulators scramble to counter AI rise with own tools

Swiss financial regulator Marlene Amstad urges banks and watchdogs to rapidly adopt new technology to counter escalating cybersecurity threats amplified by AI. She highlighted the need for faster vulnerability patching as AI models expose risks. FINMA is promoting AI adoption among global regulators to strengthen financial systems, especially for digital assets, emphasizing Switzerland's need for access to advanced AI for pre-deployment system hardening. Banks and financial sector watchdogs must move quickly to adopt new technology to plug system vulnerabilities as AI supercharges cybersecurity risks, a top Swiss financial regulator said in an interview. Here are a few details: Marlene Amstad, president of Swiss market regulator FINMA and chair of an ⁠international forum ⁠on supervisory technology, spoke to Reuters following an initial hackathon to build new tools with market supervisors. Models that detect software vulnerabilities have recently pointed to surging cyberattack and national security risks, with AI raising safety and accountability questions in financial institutions. "As hackers move faster, banks must adapt by patching vulnerabilities ⁠more rapidly," Amstad said in an interview. FINMA helped create a forum within the International Organization of Securities Commissions, ⁠a standard setter for market regulation, to promote adoption of AI by watchdogs that cover around 95% of global financial markets. Around 100 policy and technology specialists met this week for a hackathon, aiming to jointly build tools for crypto-market supervision, Amstad said. Regulators are looking at possibly embedding safeguards directly into digital asset systems, she added. Experience with models such as Anthropic's Mythos has exposed vulnerabilities, revealing AI-related operational risks, Amstad said. The U.S. government this month ⁠ordered Anthropic to suspend exports of its latest Mythos and Fable AI models, citing national security concerns. Chinese cybersecurity firm 360 Security Technology said this week it has developed a domestic answer to Mythos. "Switzerland must retain access to the most advanced AI models," Amstad said, adding that AI will be instrumental to toughen up systems before they are deployed.

Swiss Watchdog FINMA Builds Generative AI to Police Crypto Markets | PYMNTS.com

Amstad spoke with Reuters after a hackathon in which about 100 policy and technology specialists worked together to build tools for supervising crypto markets, according to the report. FINMA helped create a forum within IOSCO that encourages global financial market regulators to adopt AI, per the report. "As hackers move faster, banks must adapt by patching vulnerabilities more rapidly," Amstad said in the report. An IOSCO committee chaired by Amstad, the SupTech Forum, which focuses on supervisory technology (SupTech), developed a report released June 18 that found that AI is an increasingly important tool for supervision and regulatory oversight, IOSCO said in a post on LinkedIn. The organization said in a June 18 press release that the report, "SupTech: Mapping the Use of Technology in Financial Supervision," found that authorities are using technology for consumer and investor protection, capital markets supervision and new domains such as digital assets. "Authorities are increasingly seeking to integrate SupTech into core supervisory functions," IOSCO said in the release. "Artificial intelligence, data access and cloud infrastructure are seen as critical enablers, with efficiency, timeliness of information reception and analysis, and improved capabilities driving adoption." In a speech delivered Tuesday (June 23) at the Point Zero Forum in Zurich, Amstad said the IOSCO report showed that "AI can transform the very way we process data, derive insights and reach decisions. That goes to the heart of how we do our work." The technology's use cases include automated document analysis, market abuse investigations, sentiment analysis and crypto exposure monitoring, Amstad said. FINMA is developing a generative AI tool that scans the documents supervisors must read before conducting an on-site inspection and flags anomalies that are worth a closer look. A second generative AI tool then checks those suggestions to make sure they are not hallucinations and then passes them along to the supervisor, Amstad said. The regulator is also developing AI-powered tools that spot suspicious trading patterns and determine if they point to insider trading, Amstad said. FINMA has also developed a dashboard for real-time crypto monitoring that combines the quantities reported each quarter with daily market prices to spot concentration risks in which too much rests on a single institution and operational risks of tokens on a single blockchain, Amstad said. "These are only some of many examples, but I hope they make the abstract concrete: for us, SupTech is no longer a promise -- it is already at work," Amstad said.