AFSLs warned on AI risk governance
Two DASH executives have urged financial advice practices to enact artificial intelligence (AI) policies into their risk governance frameworks.
Last October, ASIC conducted a report into how AFSLs were starting to use AI in their practices and possible areas where they could come unstuck from a governance perspective.
The corporate regulator said it observed gaps in arrangements for managing AI risk, with approximately half of licensees having specifically updated their risk management policies or procedures to address AI risks.
Speaking on a recent DASH webinar, the firm’s chief commercial officer Mark Papendieck encouraged advice practice owners to implement their own AI usage policies to prevent unwanted attention from the regulator.
“ASIC does expect all of us to be understanding how AI is being used in your business. That includes whether or not one of your staff members is using ChatGPT to write a blog. You need to know that, you need to have a framework about what’s acceptable, what isn’t. That is what ASIC expects,” Papendieck outlined.
“The starting point there is to have a policy around AI usage and make sure it’s integrated into your risk governance framework because ASIC is looking at that, they’ve released a guidance paper where they talk about what they’ve looked at and what they will look at.”
His recommendation echoes previous calls from AI provider Paradino co-founder, Josh Ratnarajah, who said last year that the responsibility currently lies with the licensee to have an AI policy for practices.
Also chiming in on the webinar, DASH’s chief executive Andrew Whelan expressed fears regarding whether ASIC could place further regulation on the usage of AI in financial services.
“[AI] is here and it’s not going away. The horse has bolted, so it’s really about an adapt or die situation in my mind. My biggest fear for the industry, frankly, is there’s a big review going on by the Treasury at the moment. Since it’s complex and it’s moving so quickly, I think one of the worst possible results for us as an industry would be if ASIC overregulated again and just threw the whole baby out with the bathwater because it’s all too hard,” the CEO said.
On 11 February 2025, the House of Representatives Standing Committee on Employment, Education and Training tabled its The Future of Work report following its inquiry into the digital transformation of workplaces.
In particular, the committee’s inquiry uncovered that AI’s digital transformation has exposed significant challenges, such as gaps in Australia’s regulatory frameworks and workplace protections.
This coincided with recent research from the Finance Sector Union (FSU), which found that three-quarters of finance workers said they are yet to have a discussion with their employer about AI, and 61 per cent said they have not received any training on it from their employer.
Just 8 per cent of employees in the sector described their understanding of AI as “good”, while 38 per cent rated their understanding as either “low” or “very low”. As a result of this, 61 per cent of respondents said they worry AI threatens their job security.
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