Navigating the AI Frontier in Finance - Insights from the SEC Roundtable

 

FINOS's Stake in the AI Conversation

FINOS, the Fintech Open Source Foundation, has a significant interest in fostering responsible AI innovation within the financial services sector. Our commitment is reflected in the development of the FINOS AI Governance Framework.. This framework is designed to provide a standardized, collaborative approach for Financial Services Institutions (FSIs) to manage the onboarding, development, and operation of GenAI-based solutions.. Our core aims are to enable FSIs to harness the transformative potential of GenAI while proactively mitigating associated risks and addressing the unique regulatory and data-sensitive landscape of our industry.

The journey to this framework began within our AI Readiness Special Interest Group (SIG), which has since evolved into a dedicated project to further its development and adoption. Key milestones in its development include:

• 30 April 2024: Launch of the FINOS AI Readiness SIG to address AI challenges in finance.
• 25 June 2024: London Workshop
• 1 Oct 2024: AI Governance Framework Draft Release at OSFF NYC
• 12  February 2025: The DTCC-hosted AI Powered Hackathon, supported by FINOS, served as a practical proving ground for applying and refining early concepts of the framework.

 

Our involvement in the SEC Roundtable was further underscored by the participation of individuals and organizations deeply connected to the FINOS community. We were particularly engaged with Johnna Powell from DTCC, with whom we recently collaborated on the DTCC-hosted AI Powered Hackathon (https://www.finos.org/blog/ai-strategic-initiative-series-innovate-dtcc-ai-hackathon, https://www.dtcc.com/dtcc-connection/articles/2025/january/15/dtccs-first-ai-powered-hackathon).

Johnna's presence on the "AI Governance and Risk Management" panel, together with other senior professionals from other FINOS member organizations such as Morgan Stanley and AWS, highlighted the critical role FINOS members are playing in shaping the future of AI in finance.

 

Delving into the Governance Discussion

The "AI Governance and Risk Management" panel provided a rich and insightful discussion on the practicalities and challenges of overseeing the use of AI within financial products and services. Johnna Powell from DTCC specifically highlighted the relevance and utility of the collaborative efforts undertaken within FINOS:

"FINOS governance framework developed with banks - useful for risks and controls." (See Johnna's thought from the SEC AI Rountable here)

This quote directly underscores the industry-focused nature of the FINOS AI Governance Framework and its potential to provide tangible solutions for managing the inherent risks associated with AI adoption in finance. Johnna further emphasized the critical need for establishing dedicated governance functions and robust risk management frameworks that span the entire lifecycle of AI solutions, from development to post-production. Her emphasis on a "risk-based approach" and the importance of anticipating risks at every stage aligns perfectly with the core principles underpinning the FINOS framework.

The panel also delved into the crucial aspects of inputs and outputs in AI models. Johnna highlighted the complexities introduced by models like those using Retrieval-Augmented Generation (RAG) and Large Language Models (LLMs), where understanding the context of inputs and ensuring the accuracy and relevance of outputs are paramount. She stressed the need for technical frameworks to evaluate the effectiveness of these models for developers. Jeff McMillan from Morgan Stanley echoed this sentiment, emphasizing the need for a "robust evaluation process to deploy responsibly," which inherently involves a deep understanding of how inputs influence outputs. The discussion underscored that as AI models become more sophisticated and less deterministic, the methods for validating and monitoring the relationship between inputs and outputs must also evolve. Rigorous testing across various use cases, as mentioned by Johnna, becomes essential to ensure the reliability and trustworthiness of AI-driven financial applications.

In summary, the panel discussion on AI Governance and Risk Management underscored several key themes:

• The imperative for robust governance frameworks is becoming increasingly clear as AI adoption accelerates in financial services.
• A risk-based approach is essential for prioritizing governance efforts and allocating resources effectively.
• Collaboration and the sharing of best practices, as exemplified by the FINOS AI Governance Framework, are crucial for navigating the complexities of AI in a highly regulated industry.
• Understanding and managing the inputs and outputs of AI models, particularly non-deterministic ones, requires sophisticated evaluation and testing methodologies.
• The financial industry is actively grappling with defining AI, establishing clear lines of responsibility, and adapting existing risk management frameworks to address the unique challenges posed by AI technologies.

The insights shared at the SEC Roundtable were invaluable and reinforce the importance of the work being done within FINOS to create practical, open-source solutions for the financial services industry as it embraces the age of artificial intelligence.

Author: Karl Moll, FINOS Technical Project Advocate

 

CALLS TO ACTION

May 7th: FINOS OSinFinance Webinar – The Unexpected Risks of AI in Finance: What You’re Not Watching Could Cost You featuring Sonatype & NVIDIA.

 

Why get involved: Join experts as they reveal overlooked hardware, software supply chain, and regulatory risks that AI introduces into financial environments. Learn critical strategies to spot and mitigate threats you didn't know were present as your firm adopts AI.

 

How to get involved:
Register and learn more here

 

You can also share the full details PDF with colleagues: 

 

 

Why get involved: This workshop is a key opportunity to dive deeper into the AI Governance Framework, collaborate with peers, and directly contribute to its development. Your input is invaluable as we work towards v1.0.

 

How to get involved:
Learn more and register here

May 14–15: Open Source in Finance Developer Day by FINOS @ apidays NYC.

Why get involved: FINOS Members get free access to both days of apidays NYC, including a dedicated FINOS OSinFinance Developer Track on May 15th packed with hands-on sessions on topics like GenAI. It's a great chance to connect and deepen your technical skills alongside peers in open finance.

How to get involved:
Register and learn more here: https://www.apidays.global/new-york/.

 

If you are a FINOS Member, email events@finos.org for your free access code.

 

You can also share the full details PDF with colleagues

June 24th: Open Source in Finance Forum – London.

Why get involved: Join FINOS's flagship European conference where financial services leaders and technologists meet to accelerate open collaboration and advance strategic initiatives like FDC3, CDM, and CCC. This year, OSFF London features two dedicated Open Source AI tracks: one tailored for developers with technical deep-dives and another for business leaders and strategists focusing on the strategic implications and adoption of AI in finance. Connect with peers, see real-world implementations, and remember that FINOS Members attend for free!

How to get involved:

Secure your pass here: https://events.linuxfoundation.org/open-source-finance-forum-london/.

Email osff@finos.org for your FINOS Member code.

You can also share the full details PDF with colleagues