As transactions are processed, the machine learning applications assigns a risk score and  Page 6  this allows card issuers to block potential fraud losses before the transaction proceeds. The Bank, PRA and FCA will publish a Discussion Paper later this year on how the current UK regulatory framework applies to artificial intelligence and machine learning. The paper will also explore how policy can best support further safe and responsible adoption and whether additional clarification of existing regulation may be helpful. Financial market developments: a real-time case study Let me return from the possible futures represented by the adoption of AI to the here and now and the financial market developments we have seen this week in the UK which have meant that I haven’t been able to join you in Vilnius. As is the case for all central banks the Bank utilises various data to provide detailed coverage of financial market developments, ranging from real time quantitative data from wholesale markets through to qualitative market intelligence (MI). We complement the views of external market contact base with the views of our own specialist experts among Bank staff[12]. The Bank’s focus is primarily around those financial markets closest to our mission. The backdrop to the latest events is that financial markets globally have been volatile in recent months, with increases in government bond yields and falls in risky asset prices. While largely orderly in most markets, pressures were observed in parts of the financial system, including challenging liquidity conditions across some markets.

Cross-border payments  Page 5  are by their nature more complex than purely domestic ones. They involve more, and in some cases numerous, intermediaries, time zones, jurisdictions and regulations. In some instances, a cross-border payment can take several days and can cost up to 10 times more than a domestic payment. That is why enhancing cross-border payments was set as a priority in 2020 by the G20 and the UK has been playing a leading role in the comprehensive work programme led by the FSB[6] and which the CPMI and the BIS more broadly are closely involved in. One of the main frictions in the cross-border space is where the same transaction must be reviewed multiple times to ensure that the parties are not exposing themselves to illicit finance under different national regulations and sanctions lists. The current costs of AML/CFT compliance are significant[7]. Experience with complementary innovations such as digital IDs has already demonstrated the potential for cost savings[8]. There is also a significant time and resource benefit as sanctions alerts have typically been generated on a far greater number of transactions than actually are “true” hits. The mismatch between an alert and identification of a sanctioned transaction creates extra layers of review which extend transaction timelines and add cost – particularly where additional manual controls are needed. The G20/FSB Roadmap on cross-border payments is, amongst other things, focussed on how a more effective use of and greater standardisation of data could help to streamline AML/CFT and sanctions compliance.