Financial institutions remain accountable for third-party AI under new MAS guidelines

The Monetary Authority of Singapore (MAS) has released new guidelines aimed at supervising financial institutions' management of risks arising from artificial intelligence (AI) use. The Guidelines on Artificial Intelligence Risk Management will commence on October 7, 2027, and apply to all financial institutions and all types of AI technologies.

Financial regulators and international bodies have been emphasizing the need to effectively manage AI risks while enabling firms to benefit from their adoption. These guidelines stem from a public consultation where respondents demonstrated strong support for a principles-based and risk-proportionate approach. Financial institutions should evaluate their AI use based on its nature and scale, implementing the guidelines in phases and meeting the expectations from Sections 3 to 4 by October 7, 2027, and Sections 5 and 6 by October 7, 2028.

The guidelines outline four key expectations for financial institutions to manage AI risks: effective oversight by board and senior management, identification, assessment, and management of AI risks throughout the AI life cycle, managing risks from third-party AI use, and applying the guidelines in a risk-proportionate manner. MAS deputy managing director Ho Hern Shin emphasized that AI has the potential to enhance financial services, but realizing these benefits sustainably requires financial institutions to understand and manage the associated risks.