01_DLA Piper_Nicolas Kalokyris. .pptx

1. Nicolas Kalokyris - 22 February 2024
FinTech Belgium – Meet up
Regulatory considerations on the use of artificial intelligence
in the financial services sector

2. www.dlapiper.com 2
Principal examples of the emergence of AI in the financial services sector: overview
1. AI applications in the financial services sectors & applicable regulations
AI applications in the financial services
sectors & applicable regulations
AI and banking services
Neobanks
Credit scoring: AI and
the granting of loans
Chatbots: AI and the
automation of the
customer relationship
AI and investment services
Algorithmic and high-
frequency trading: AI
and the trading of
financial instruments
Robo-advisors: AI
and investment
advisory services
AI and the prevention of money laundering
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024

3. www.dlapiper.com 3
AI & banking services – Focus on the Belgian banking sector
1. AI applications in the financial services sectors & applicable regulations
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
Source: National Bank of Belgium, The impact of Fintech and digitization on the Belgian banking sector, 2021.

4. www.dlapiper.com
AI & banking services
4
1. AI applications in the financial services sectors &
applicable regulations
Neobanks
Fintechs that offer fully
virtual banking services,
such as:
- Checking accounts
and credit accounts
- Loans (including
mortgage loans)
- Financial advisory
services
- Payment services
Subject to existing
regulations and to the
same regulatory
requirements as other
regulated banks:
 Banking lincence
required
 Limitation to
payment services –
PI / EMI license
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024

5. www.dlapiper.com 5
1. AI applications in the financial services sectors & Applicable regulations
AI & banking services
Credit scoring – AI and the granting of loans
• Credit scoring models assign a score to each individual by categorizing loan applicants according
to risk classes, as follows:
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
Source: Credit Underwriting : Alternative Credit Scoring & Machine Learning, Abhishek S.,
Credit Underwriting : Alternative Credit Scoring & Machine Learning (linkedin.com).
• Assessment of consumer’s creditworthiness prior to loan origination

6. www.dlapiper.com 6
1. AI applications in the financial services sectors & applicable regulations
AI & banking services
Case law C-634/21 /OQ v. SCHUFA
07 December 2023
Credit scoring – AI and the granting of loans
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
A decision based solely on automated processing is authorised only in the cases referred
to in that Article 22(2):
- That decision is necessary for entering into, or performance of, a contract between the
data subject and a data controller
- authorised by EU or Member State law to which the controller is subject, and which also
lays down suitable measures to safeguard the data subject’s rights and freedoms and
legitimate interests
- based on the data subject’s explicit consent
The ECJ confirmed that credit scoring constitutes an ‘automated individual decision-
making’ within the meaning of article 22 (1) of GDPR

7. www.dlapiper.com 7
1. AI applications in the financial services sectors & applicable regulations
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
Credit scoring – AI and the granting of loans
AI & banking services
Consumer Credit Directive II (Dir. 2023/2225)
Whenever the creditworthiness assessment involves automated
processing, the consumer should have the right to obtain human
intervention on the part of the creditor, consisting of the right to:
o Request and obtain from the creditor a clear and comprehensible
explanation of the assessment of creditworthiness, including on
the logic and risks involved in the automated processing of personal
data as well as its significance and effects on the decision;
o Express the consumer’s own point of view to the creditor; and
o Request a review of the assessment of the creditworthiness and the
decision on the granting of the credit by the creditor.
Applicable as of November 2026.

8. www.dlapiper.com
AI & banking services
8
1. AI applications in the financial services sectors & applicable regulations
Chatbots : AI and the automation of the customer relationship
• Virtual assistance programs
• Utilisation of AI (NLP) to interact online with the institution’s
customers, answer certain questions and offer them certain
services, such as balance verification and other basic advice
• Based on sophisticated algorithms, offering a personalized support
• Utilisation of big data, and collection of the data supplied by the
customers – Compliance with GDPR
• New Directive (EU) 2023/2673 as regards financial services
contracts concluded at a distance : Right for consumers to request
human intervention when they interact with the trader through fully
automated online interfaces – such as chatbots (applicable as of
June 2026).
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024

9. www.dlapiper.com
AI & Investment services
9
1. AI applications in the financial services sectors & applicable regulations
Robo-advisors: AI and investment advisory services
• Software programs
that are based on
algorithms and used
by some financial
institutions to provide
automated investment
services (mostly
investment advice and
portfolio management
services)
• Little to no human
interaction with
customers
• Primarily investing in
ETFs and diversifying
their portfolios to
mitigate investment
risks
• Investment services
governed by MiFID II
•  investment firms
and financial
intermediaries that us
robo-advisors must
comply with financial
market regulations,
including the rules on
investor protection
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024

10. www.dlapiper.com
AI & Investment services
10
1. AI applications in the financial services sectors &
applicable regulations
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
AI and the prevention of money laundering
• Big data and machine learning are already used by a substantial number of
financial institutions to automate their KYC procedures
• Development of automated transaction-monitoring systems – Improvement of
the detection of suspicious transactions while reducing the rate of false
positives
• AI helps financial institutions lighten their workloads, streamline their
procedures, and reduce their operational costs
• Towards acceptance of AI for entities to meet their AML obligations?
BUNQ BV v. De Nederlandsche Bank – Amsterdam Court of Appeal
emphasised that the law leaves room for the implementation of new
methods, including AI-based methods, as long as these result in the
fulfilment of these obligations
• Belgian AML Royal Decree – implementation of monitoring system to detect
atypical transactions that must be automated

11. www.dlapiper.com 11
4. Regulating artificial intelligence in the financial services sector
• Application of regulations in the same manner to
all regulated financial services, whatever the
underlying technology used
• Ensure future-proof regulation
• Legal uncertainty for the financial sector –
difficulties to determine how the requirements of
financial regulations that were not written with
technological innovations in mind should apply to
a business model based on technological
innovation
Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024
Principles
• Determination of different levels of risk
• Implementation of appropriate measures in
response to the relevant risk level
• An approach that is already being used for
AML requirements
• Approach taken in drafting the EU Artificial
Intelligence Act (AI ACT).
Risk-based approach
Principle of technological neutrality

12. www.dlapiper.com Meet-up with FinTech Belgium - Artificial Intelligence & Financial Services - 22 February 2024 12
AI Act – Risk-based approach
UNACCEPTABLE
RISK
HIGH RISK
LIMITED RISK
MINIMAL/NO RISK
Prohibited
Mandatory requirements & conformity assessment
procedures
Transparency
obligations
Code of Conduct -
Voluntary
4. Regulating artificial intelligence in the financial services sector
Credit scoring
Fraud
detection
Chatbots

13. 13
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com.
This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used
as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as
“Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
Copyright © 2024 DLA Piper. All rights reserved.
Thank you for your attention!
Nicolas Kalokyris
T +32 (0)2 500 1652
Nicolas.Kalokyris@dlapiper.com
LAWYER
Lead Lawyer
Financial Services &
Fintech Department
DLA Piper UK LLP
Lecturer - ULB