,,ii #aaith ,,congress #ast ,session ,s4 #bebh ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #bi1 #bjbe ,mr4 ,rounds 7for himself1 ,mr4 ,heinrich1 ,mr4 ,tillis1 and ,mr4 ,kim7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to establish ,,ai ,innovation ,labs that permit certain persons to experiment with artificial intelligence without expectation of enforcement actions4 #a4 ,short title ,this ,act may be cited as the ,unleashing ,,ai ,innovation in ,financial ,services ,act4 #b4 ,definitions 7#a7 ,,ai test project ,the term ,,ai test project means a financial product or service that-- 7,a7 falls under the jurisdiction of a financial regulatory agency2 7,b7 makes substantial use of artificial intelligence2 and 7,c7 is1 or may be1 subject to a ,federal regulation or ,federal statute4 7#b7 ,appropriate financial regulatory agency ,the term appropriate financial regulatory agency means-- 7,a7 the appropriate ,federal banking agency1 as defined in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac71 with respect to an institution described in subsection 7q7 of that section2 7,b7 the ,securities and ,exchange ,commission1 with respect to an institution not described in subparagraph 7,a7 that is-- 7i7 any broker or dealer that is registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7ii7 any investment company that is registered with the ,commission under the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#a et seq472 7iii7 any investment adviser that is registered with the ,commission under the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#a et seq472 7iv7 any clearing agency registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7v7 any nationally recognized statistical rating organization registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7vi7 any transfer agent registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7vii7 any exchange registered as a national securities exchange with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7viii7 any national securities association registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7ix7 any securities information processor registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7x7 the ,municipal ,securities ,rulemaking ,board established under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7xi7 the ,public ,company ,accounting ,oversight ,board established under the ,sarbanes-,oxley ,act of #bjjb 7#ae ,u4,s4,c4 #gbaa et seq472 7xii7 the ,securities ,investor ,protection ,corporation established under the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;aaa et seq472 and 7xiii7 any security-based swap execution facility1 security-based swap data repository1 security-based swap dealer1 or major security-based swap participant registered with the ,commission under the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq471 with respect to the security-based swap activities of the person that require such person to be registered under such ,act2 7,c7 the ,bureau of ,consumer ,financial ,protection1 with respect to a covered person1 as defined in section #ajjb of the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edha71 that does not have an appropriate financial regulatory agency under subparagraph 7,a71 7,b71 7,d71 or 7,e7 of this paragraph2 7,d7 the ,national ,credit ,union ,administration1 with respect to an insured credit union1 as defined in section #aja of the ,federal ,credit ,union ,act 7#ab ,u4,s4,c4 #ageb72 and 7,e7 the ,federal ,housing ,finance ,agency1 with respect to-- 7i7 a ,federal ,home ,loan ,bank2 7ii7 the ,federal ,home ,loan ,bank ,system2 7iii7 the ,federal ,national ,mortgage ,association2 and 7iv7 the ,federal ,home ,loan ,mortgage ,corporation4 7#c7 ,artificial intelligence2 ai ,the terms artificial intelligence and ,,ai have the meaning given the term artificial intelligence in section #ejjb of the ,national ,artificial ,intelligence ,initiative ,act of #bjbj 7#ae ,u4,s4,c4 #idja74 7#d7 ,commission ,the term ,commission means the ,securities and ,exchange ,commission4 7#e7 ,federal securities laws ,the term ,federal securities laws means-- 7,a7 the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;a et seq472 7,b7 the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq472 7,c7 the ,sarbanes-,oxley ,act of #bjjb 7#ae ,u4,s4,c4 #gbja et seq472 7,d7 the ,trust ,indenture ,act of #aici 7#ae ,u4,s4,c4 #gg;aaa et seq472 7,e7 the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#a et seq472 7,f7 the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#a et seq472 7,g7 the ,jumpstart ,our ,business ,startup ,act 7,public ,law #aab-ajf2 #abf ,stat4 #cjf72 and 7,h7 the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7,public ,law #aaa-bjc2 #abd ,stat4 #acgf74 7#f7 ,financial product or service ,the term financial product or service-- 7,a7 has the meaning given the term in section #ajjb of the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edha72 7,b7 includes-- 7i7 activities that are financial in nature1 as defined in section #d7k77#d7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdc7k77#d772 7ii7 any financial product or service provided by a person regulated by the ,commission1 as defined in section #ajjb of the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edha72 and 7iii7 includes the offer or sale of any security subject to the ,federal securities laws2 and 7,c7 does not include the business of insurance4 7#g7 ,financial regulatory agency ,the term financial regulatory agency means-- 7,a7 the ,board of ,governors of the ,federal ,reserve ,system2 7,b7 the ,federal ,deposit ,insurance ,corporation2 7,c7 the ,office of the ,comptroller of the ,currency2 7,d7 the ,securities and ,exchange ,commission2 7,e7 the ,bureau of ,consumer ,financial ,protection2 7,f7 the ,national ,credit ,union ,administration2 and 7,g7 the ,federal ,housing ,finance ,agency4 7#h7 ,regulated entity ,the term regulated entity means an entity regulated by any financial regulatory agency4 #c4 ,use of artificial intelligence by regulated financial entities 7a7 ,,ai innovation labs 7#a7 ,establishment ,each financial regulatory agency shall establish1 or identify an office1 division1 or department of the agency that shall serve as1 an ,,ai ,innovation ,lab to enable regulated entities to experiment with ,,ai test projects without unnecessary or unduly burdensome regulation or expectation of enforcement actions1 pursuant to the approval of an application under paragraph 7#b74 7#b7 ,applications 7,a7 ,submission 7i7 ,in general ,a regulated entity may submit to the appropriate financial regulatory agency an application1 on a form determined by the appropriate financial regulatory agency1 to engage in an ,,ai test project through the ,,ai ,innovation ,lab established or identified under paragraph 7#a74 7ii7 ,contents ,an application submitted under clause 7i7 shall include-- 7,i7 a description of the ,,ai test project proposed to be carried out by the regulated entity2 7,,ii7 an alternative compliance strategy that-- 7aa7 identifies a regulation issued by the appropriate financial regulatory agency that the regulated entity requests to be waived or modified2 and 7bb7 proposes an alternative method for the regulated entity to comply with the regulation1 including an explanation as to why the alternative method is essential to the operation of the entity and how the regulated entity would effectively manage risks associated with the ,,ai test project2 7,,iii7 an explanation of how under the strategy described in subclause 7,,ii71 the ,,ai test project-- 7aa7 would serve the public interest1 improve consumer or investor access to a financial product or service1 or promote consumer or investor protection2 7bb7 would enhance efficiency or operations1 foster innovation or competitiveness1 improve risk management and security1 or enhance regulatory compliance2 7cc7 would not present a systemic risk to the financial system of the ,united ,states2 7dd7 is consistent with the purposes of the anti-money laundering and countering the financing of terrorism obligations under subchapter ,,ii of chapter #ec of title #ca1 ,united ,states ,code2 and 7ee7 would not present a national security risk to the ,united ,states2 7,,iv7 a proposed date on which the ,,ai test project would terminate and an explanation why such termination date would be appropriate2 7,v7 proposed limitations on the size1 scope1 and growth of the ,,ai test project2 7,,vi7 a detailed business plan2 and 7,,vii7 an estimate of the economic impact of the ,,ai test project if approved4 7iii7 ,joint applications ,two or more regulated entities may submit a joint application to the same financial regulatory agency under clause 7i74 7iv7 ,regulations of other agencies 7,i7 ,in general ,a regulated entity may submit an application under this subparagraph that includes an alternative compliance strategy for a regulation issued or enforced by a financial regulatory agency that is not the appropriate financial regulatory agency for the regulated entity4 7,,ii7 ,requirements ,an application described in subclause 7,i7 shall be subject to the same requirements as an application described in clause 7ii71 except that-- 7aa7 the regulated entity shall submit the application to the appropriate financial regulatory agency and the financial regulatory agency that issued or enforces the regulation that is the subject of the alternative compliance strategy2 and 7bb7 the ,,ai test project may not take effect unless the appropriate financial regulatory agency and any other financial regulatory agency that issued or enforces the regulation that is the subject of the alternative compliance strategy jointly approve the application using the process described in subparagraph 7,b74 7v7 ,notice ,a regulated entity that is regulated or supervised by more than #a financial regulatory agency shall provide notice of any application submitted to the appropriate financial regulatory agency under this section to each financial regulatory agency by which it is regulated or supervised not later than #e business days after the entity submits the application to the appropriate financial regulatory agency4 7,b7 ,agency review 7i7 ,in general ,except as provided in clause 7iv71 not later than #abj days after the date on which an application is submitted to the appropriate financial regulatory agency under subparagraph 7,a71 the appropriate financial regulatory agency shall-- 7,i7 review the application2 and 7,,ii7 submit to the applicant in writing a determination of the agency4 7ii7 ,approval 7,i7 ,in general ,if the applicant shows that it is more likely than not that the application meets the requirements for establishing an alternative compliance strategy and satisfies the standards described in subclauses 7,,ii7 and 7,,iii7 of subparagraph 7,a77ii71 the agency shall approve the application and notify the applicant in writing of-- 7aa7 the regulation that is the subject of the alternative compliance strategy2 7bb7 the terms of the alternative compliance strategy for the ,,ai test project2 7cc7 the date on which the ,,ai test project will terminate2 7dd7 any limitations on the size1 scope1 or growth of the ,,ai test project2 and 7ee7 any additional limitations or conditions on the ,,ai test project1 as determined by the appropriate financial regulatory agency4 7,,ii7 ,effect of approval ,with respect to an ,,ai test project1 except as provided in subclause 7,,iii71 beginning on the date on which an application submitted under subparagraph 7,a7 is approved and ending on the date described in subclause 7,i77cc7-- 7aa7 the appropriate financial regulatory agency may enforce a regulation described in subclause 7,i77aa7 only in the manner set out in the alternative compliance strategy described in subclause 7,i77bb72 and 7bb7 a financial regulatory agency that is not the appropriate financial regulatory agency may not enforce a regulation described in subclause 7,i77aa74 7,,iii7 ,enforcement by another financial regulatory agency ,with respect to an ,,ai test project1 a financial regulatory agency other than the appropriate financial regulatory agency that approves an application under subparagraph 7,a77iv7 may enforce a regulation described in subclause 7,i77aa7 if the alternative compliance strategy described in subclause 7,i77bb7 provides for enforcement by such financial regulatory agency4 7,,iv7 ,rule of construction ,nothing in this clause may be construed to limit the authority of a financial regulatory agency to take an enforcement action against a regulated entity with respect to fraud or for engaging in an unsafe or unsound practice relating to an ,,ai test project4 7iii7 ,denial 7,i7 ,in general ,if an agency denies an application submitted under subparagraph 7,a71 the agency-- 7aa7 shall submit to the applicant a written notice explaining the reason for denial2 and 7bb7 may not take an enforcement action related to the proposed ,,ai test project against the applicant earlier than the date that is #cj days after the date on which the agency submits the written notice described in item 7aa74 7,,ii7 ,resubmittals ,each time an application submitted under subparagraph 7,a7 is denied1 the regulated entity-- 7aa7 may submit an amended application after receiving feedback from the agency making such denial2 and 7bb7 may not resubmit more than #b applications that are substantially similar to the denied application4 7,,iii7 ,injunctive relief ,a financial regulatory agency1 by and through its own attorneys1 may file a civil action in an appropriate ,united ,states district court to enjoin an ,,ai test project if the agency determines that the ,,ai test project-- 7aa7 presents an immediate danger to consumers or investors2 or 7bb7 presents a risk-- 7,,aa7 to financial markets2 7,,bb7 in the case of an ,,ai test project engaged in by an insured depository institution or an insured credit union1 of loss to a ,federal deposit or share insurance fund2 7,,cc7 of a violation of anti-money laundering and countering the financing of terrorism obligations under subchapter ,,ii of chapter #ec of title #ca1 ,united ,states ,code2 or 7,,dd7 to the national security of the ,united ,states4 7iv7 ,extension ,if the financial regulatory agency needs additional time1 the agency may extend the approval deadline by #abj days4 ,after the expiration of the #abj-;day extension period1 if the agency has not made a determination on the application1 the application will automatically be deemed approved and effective4 7,c7 ,data security ,all data supplied by sponsors of ,,ai test projects to a financial regulatory agency submitted under this section shall be stored and maintained in a secure manner by the financial regulatory agency1 consistent with applicable data security standards4 7,d7 ,regulations ,not later than #ahj days after the date of enactment of this ,act1 each financial regulatory agency shall promulgate regulations that-- 7i7 shall be published in the ,federal ,register and provide a #fj-;day period for public notice and comment2 and 7ii7 include-- 7,i7 procedures for modifying the ,,ai test projects that are approved by the agency2 7,,ii7 consequences for failure to comply with the terms of an alternative compliance strategy2 7,,iii7 a requirement that an ,,ai test project will terminate not earlier than #a year after the ,,ai test project is approved2 7,,iv7 procedures to extend the termination date described in subclause 7,,iii72 7,v7 procedures for confidentiality2 and 7,,vi7 procedures for coordinating decisions relating to applications submitted jointly by multiple regulated entities or applications submitted to more than one financial regulatory agency4 7b7 ,report ,not later than #b years after the date of enactment of this ,act1 and each year for #g years thereafter1 each financial regulatory agency shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives an annual report on the outcomes of ,,ai test projects4 ,a report under this subsection may not include the names of participating entities or any proprietary or confidential business information4 ,a report under this subsection shall include aggregated findings1 trends1 and lessons learned from the ,,ai test projects4 7c7 ,rule of construction ,nothing in this section may be construed to limit the authority of a financial regulatory agency to take an enforcement action against a regulated entity with respect to fraud relating to an ,,ai test project4