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Law And Financial AI- A system that is less Unnatural and more Brilliant

There are so many examples through which the advent of Artificial Intelligence (AI) in our daily lives is indicated, such as introduction of robots by Kerala police is a shocking yet true news, there are several robots-themed restaurants also. AI has many constructive implementations, as seen in the above stated examples. But the AI system has ability to get learnings from various occurrences and to work individually for human beings, due to which AI system becomes the most troublesome technology that alters on its own.

This is why forecasting and scrutinizing the problems related to law, is not that easy. Due to this, there are chances of emergence of serious challenges towards the criminal law. It would be very difficult for the courts to hold accountable for the crimes which involve the AI systems, because how can robots be hold accountable for something which has hastily caused wrong to another.

This article deliberates about the multifaceted field of Artificial Intelligence and its connection with law and why there is a need for establishing a relation between AI, Law and Financial services. AI has converted finance into an inexpensive, speedy, huge, approachable and more commercial system through various means. But there are also some major drawbacks which occur despite of such development by Financial Artificial Intelligence.

In this article author offers a learning about those drawbacks, that how AI and misinterpretations related to it can injure and hamper the finance and law. It especially calls attention to the dangers of Artificial coding, databases, virtual threats and risks and other perils related to financial AI. It also gives emergence to bigger matters related to the inference of AI with financial cybersecurity and society in the future.

Here we will discuss about many topics such as:
  1. What is Artificial Intelligence
  2. AI and law- A prolific alliance
  3. AI, Finance and law- Drawbacks and risks
  4. Inferences and Recommendations.
Eventually this chapter strives to give a discerning perspective to think about the effects and relations of AI, finance and law with each other in order to form great Financial AI- A system which is less Unnatural and considerably Brilliant.

In recent years the advent of Artificial Intelligence in the field of Finance and also afar to it has comprehensively accumulated a large share of attention.[i]Artificial intelligence is somehow approaching people�s wealth.[ii] The artificial intelligence and the other modified technologies offers developments and assurance for financial systems which are indeed astonishing, nevertheless a lot more is still to be noticed.[iii]

The world is just on the inception or about to get introduced about the complex technologies and at the foremost stage of the era of artificial intelligence. The people have watched in recent years or so that artificial intelligence increased possibilities of facilitation in financial systems by improved technologies.[iv] Smartly developed machines and AI have been abolishing the earlier attempts of people towards the financial system.[v]

The advent of artificial intelligence has completely modified almost all the sectors related to financial system such as trading, financial research, risk analysis, wealth management & investment banking etc. Though most of the facilitations and revolutions have been proved to be revenue generating with a great margin of profit and also became favourable ethically or culturally.

The cost of funds for trading and business executives have been cut down through this modification and it also increased the methods of economic means to a greater and manifold resident, and hence financial system became trouble free for users they now find it easier to save and put money into for future use.[vi] But after all of this useful advancements or developments and assurance that artificial intelligence provides for financial system it also gives rise to various hazards and jeopardy.

What Does Artificial Intelligence Means?

A learning about the experimental processes with the use of methodological structure and devices of information processing. Artificial intelligence developed in mid-fifties. One of the founders of Artificial intelligence, Marvin Minsky propounded that artificial intelligence is the science of making machines do things that would require intelligence if done by man.[vii] Therefore, it can be said that all the smart conducts such as playing a game of Chess, solving the problems of complex calculations, making analogies, having extraordinary visions beyond the general concepts, these all are a part of principality of Artificial intelligence. The conducts which are more complex as we have discussed are much easier for artificial intelligence rather than those which are simple conducts for a normal human being.

Artificial intelligence has distinct approach from other subjects like psychology or philosophy because of its command over the examination in calculative expressions.[viii] There are majorly two reasons because of which the Artificial intelligence is being pursued and those are- 1) with the help of this the functioning of intellect or surveillance of human beings are perceived[ix] and 2) It helps in the formation or development of more brilliant data processor and software.

In legal facet these two aspects are very helpful as they help to develop a computer program in order to conduct teachings and research works more efficiently. These further help in constructing a pragmatic structure for instance which can help with preparing a contention or brief of a case. In order to turn out these performances more effective, a researcher of Artificial intelligence requires to state that how the analogy is to be come about and for that what type of facts and techniques are required. The scope behind the idea of Artificial intelligence is to use schemes and procedures of computer technologies and software to expand imaginative and calculative frameworks.

Ai & Law- A Prolific Alliance:

There are ample chances for development of scientific representation of Artificial intelligence which are also based on computational models, though there are so many instances or objectives in Law that turn the whole scenario other way round and makes it difficult for AI, some of which are as follows:
  1. Reasoning which should be provided is more complex as it includes analogies, references, judgments and laws, statutes etc., as well as the knowledge used for it is more legal which requires complex structure.
  2. The rationalization of case laws is straight-forward.
  3. Law has a characteristic of self-mindfulness, which is why there is always a debatable atmosphere between the chief exponents of law.
  4. The process of answering a legal question is way more critical and complex as it is not simply a yes or no, but it needs a whole explanation for single sentence which changes over time with the change in laws and thinking of people.
When we look into these characteristics of law, we can see that there is a probability of establishment of a prolific alliance between AI & Law. Here it can be easily observed that there is a need for artificial intelligence to grab a knowledge regarding how to form and avail an analytical reasoning because law itself consists plenty of subjects to study upon.

However, people who do researches on AI have evolved an interest in law related researches not long ago, as there are various ways of reasoning in law which are distinct from those which are handed down extensively in AI system.

On the other hand, the Law is well drafted and self- mindful, which definitely help the people who perform AI researches because if there will be no sign of place of command on law and description of reasoning of law than the researcher would find it difficult as he has to begin it from starting to get a clue of legal knowledge which is important to understand the subjects of law.

To answering questions in law is very different from answering the questions of other subjects, in law there are no distinctive or special answers rather there are answers that are based on context and the analytical philosophies. By this whole discussion it is now clear that for a body like AI, law is indeed a very transcending and effortful realm.

Doing the exploration or analysis based on the relationship of AI and law ultimately compels AI towards the new doors and hence becomes fruitful for AI. In return AI proves to be fruitful for law in many terms whether it is analytical or practical. In analytical means, a strict observation is provided to specifics and definite try-outs of intellectual ideas is also done.

This ultimately helps to perceive the presumptions and guide to schemes for clarifications. For law AI provides some perspectives through which some major tasks of answering the questions of law are solved and achieved astonishingly without enormous details departed insufficiently. [x] In practical terms AI has provided law some brilliant computerized devices, and this is why it can be said that the AI and law have true alliance with each other.

Artificial Intelligence & Finance - Relationship:

AI is developing in order to generate finances for its favor.[xi] The relationship between the Finance and AI has been developed recently[xii]. Right now, AI is just at the initial stage and this is why the advent of AI in financial system can be witnessed only from the growth in this sector in last few decades.[xiii]

Earlier, the working procedure of Financial sector were controlled by humans but now it has been changed and there are smartly developed machines which conduct all the functions and hence AI dominates the financial sector.[xiv] Many advances done by AI have proved to be fruitful in performing the tasks of Financial sector such as trading, wealth management and investment banking etc. as these are ethically advantageous.[xv]

Further, the author is going to throw light upon some of the major drawbacks and risks of AI that how the misconceptions related to it injure the law and financial system. Here we are going to study the concept of AI relating to Finance in two parts: Part I describes the understanding of drawbacks which are related to virtual threats, computer codes etc. and Part II devolves upon the inferences which develops due to the introduction of AI in finance such as competitions in financial system, internet security and social influence.

Drawbacks & Risks:

It is obvious that Financial AI has resulted in so many major developments in society but on the other hand it also gives birth to some limitations or drawbacks.[xvi] There are mainly four types of drawbacks which get their way through the advent of AI in Financial system, which are discussed below:
  1. Uncertainty In Financial Markets And Virtual Ciphers:

    The program related to AI have their unique codes and ciphers through which all the occurrences of Financial markets are apprehended. Despite the fact how smart AI system is there are so many compound and difficult parts in financial system that are beyond description and this is why are not able to be apprehended by such codes of AI.

    There are so many virtual codes that are used by AI which create a presumption about the functioning of financial market that how simple and easily understandable system it is that is not so in reality.

    As these presumptions are created by AI, they somehow simplify the the whole financial system as there are devices available to solve the problems related to it but it also generates threatening defects which is a drawback to it.[xvii] Because of these brilliantly formed AI system many ignorant people believe it to be the most powerful system which can solve all their financial complications which are created by themselves. [xviii]

    Earlier it was not clear though but now it is that consequences, drawbacks, and unpredictability in Financial system can�t be summarized by such AI generated codes because, uncertainty of human minds is far beyond the artificial codes, ciphers and calculations. [xix] Therefore, as we develop our mind towards the dependency over the Financial AI, we should surely become more aware of restricted functions to completely understand the indescribable difficulties of a human-motivated system.
  2. Preferential Statistics And Prejudicial Conclusions:

    The codes, statistics and conclusions that are prejudicial are the major classification of drawbacks and risks which are built in the advancement of financial AI. The persons who make strategies, who are controllers and are essential participants get bigger and become more observant regarding the future injuries which arose because of preferential statistics and prejudicial conclusions and this happens because of the over dependency of Financial system over the AI.

    Recently there were some noteworthy changes that took place in order to fight with this drawback of financial system. In sum it is necessary to look after that the modern AI system should not put forward the past prejudices to the present and future in form of a combined disguise of transformation, innovation and impartiality.
  3. Automated Clash And Virtual Dangers:

    The financial system confronts more dangers and threats that are related to virtual and automated technologies, this happens because of substantial reliance of financial system on AI and this is because financial system converts into an automated system.
  4. System Wide Perils And Economic Misfortune:

    There subsists very familiar system wide risk/peril which says "too big to fail," according to which bigger financial establishments apparently become too big and major for the well-being of the finance due to which it doesn�t fail.[xx]

    As financial AI gets more reliant in the financial system, organizations that are condemning for the system because of the large holdings of statistics for cause of financial AI becomes very salient for the system to break.

Key Recommendations:
  1. Extensive acquisition of Financial AI has the significant consequences over the internet security and coherence of the worldwide financial market.
  2. All the financial organisations globally, must act with substantial pace and cooperation to protect itself from the emerging dangerous acts such as cyber- strikes, that affect the core part of Financial markets.
  3. As financial AI grows the people who make policies and laws must become more observant and considerate regarding the possible inferences it have for rivalry between the market and far off.
  4. As the financial system becomes more dependent on AI, major economic participants must become more observant in protecting the motive of financial system that is majorly working for mankind.

In recent years the emergence of Financial Artificial Intelligence is one of the most noteworthy growth for all the sectors of law, financial systems and society as well. As we are aware about this developing feature of Financial AI, we must also look into the risks and drawbacks that are associated with it. we must become more conscious about the fact that Financial AI can cause injury to the persons on individual level as well as the society as whole.

In this article the author has broadly highlighted the drawbacks as well as also recommended some ways to keep check on these kinds of risks, threats and injuries that emerge because of the excessive interference of Artificial Intelligence in the systems. The author has focused to present a discerning viewpoint for rationalise again regarding the extended interdependence of law, financial system and AI with the aim to generate a better Financial AI- a system that is less unnatural and considerably brilliant.

  3. Thomas H. Davenport & Rajeev Ronanki, ARTIFICIAL INTELLIGENCE FOR THE REAL WORLD, 2018,
  4. Douglas W. Amer et al., FinTech, RegTech, and the Reconceptualization of Financial Regulation, (2017).
  5. Tom C.W. Lin, The New Investor, INTRODUCING THE CONCEPT OF CYBORG FINANCE. (2013)
  11. ARTIFICIAL INTELLIGENCE IN FINANCIAL MARKETS (Christian L. Dunis et al. eds., 2016).
  12. Supra Note 1
  13. Supra Note 4
  14. Supra Note 5
  15. Sheelah Kolhatkar & Sree Vidya Bhaktavatsalam, The Colossus of Wall Street, BLOOMBERG (Dec. 9, 2010);
  16. Bernhard Babel et al., Derisking Machine Learning and Artificial Intelligence, MCKINSEY ON RISK, June 2019,
  17. AGRAWAL ET AL., supra note 1,
  19. Paul Krugman, How Did Economists Get It So Wrong? N.Y. TIMES MAG. (Sept. 2, 2009),
  20. Kimberly Amadeo, �Too Big to Fail- Financial Crisis�,
Written By: Anshika Sharma, BA-LLB, IV year

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