AI In Regulatory Decision Making ' Is It The End Of The World?

• Published date: 28 September 2023
• Law Firm: Herbert Smith Freehills
• Author: Mr Andrew Lidbetter, Nusrat Zar, Jasveer Randhawa, James Wood and Daniel de Lisle

In November the UK will be hosting the first global summit on the regulation of AI at Bletchley Park. The recent growth of programs such as ChatGPT has prompted much debate around standards for the creation and deployment of artificial intelligence, and even concerns about the future of humanity. But what about the deployment of AI tools by governments and regulators?

Algorithms have been deployed in certain areas of public law decision-making for significantly longer than ChatGPT has been available, but there is a question as to whether the potential benefits and pitfalls of this use - and in particular the use of advanced systems - have been sufficiently debated or whether this issue has simply flown under the radar. Research conducted by Herbert Smith Freehills showed that only 5% of UK consumers are unconcerned about the growing presence of AI in everyday life. Regulated entities may tend to agree if they turn their minds to the issue.

With advanced AI tools expected to become embedded in widely used software, the operation of AI and algorithms will surely contribute more and more to governmental and regulatory decisions. High value decisions, such as on key procurement projects, subsidies, or development consent for large developments, are unlikely to be wholly made by AI tools at least for the moment, but they are likely to be used as part of the process.

The risks of large language models such as ChatGPT have been debated in the past few months, with high-profile examples of hallucinations, where the model confidently describes events that do not exist. These risks and others demonstrate that the use of AI in public sector decision making is not without its issues. It is vital that those issues are acknowledged, understood and managed to ensure key public law principles for the protection of those dealing with public bodies continue to be upheld.

How AI is already being used, and how might it be used going forward

Algorithms are sets of rules that turn inputs into outputs: for instance, an algorithm might take a transaction as its input, and assign it a risk of being fraudulent as its output, depending on various data points about the transaction. Advanced AI programs use algorithms aimed at becoming more effective at performing the task at hand. When used in the regulatory context, the algorithm or AI program is generally not the sole decision-maker - it is used at a stage in the process, or to guide decision-makers towards areas where their impact may be greater.

AI has clear advantages for often under resourced regulators. Algorithms give regulators an opportunity to marshal the large volumes of data they amass. The FCA processes over 1 billion transactions every month in Market Oversight. Its web scraping techniques, aimed at...