An interesting editorial blog from a UK legal firm on whether use of AI in internal company processes can increase risk of prosecution under the Failure to Prevent Fraud Act.
This UK Act enshrines a legal principle that is common to other anti-fraud law around the world. Unlike traditional corporate criminal attribution, the prosecution does not need to establish that any senior individuals within the company knew about or were party to the fraud. Liability arises solely from the fact that a fraud offence was committed (by any “associated party”) that would benefit the company.
The defence is that a company took reasonable steps to mitigate fraud risks, including by its own employees and suppliers. This is analogous to the “due diligence” defence in food safety law.
The argument here is that you cannot “outsource” this due diligence to AI. This is because it is foreseeable that AI results will sometimes be incorrect. In fact, if you use AI without human verification, you are weakening the due diligence defence and foreseeably increasing the likelihood of giving misleading statements. This applies to relying on AI for everything from supply-chain risk assessments to drafting of company financial reports.
Photo by Tingey Injury Law Firm on Unsplash
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