“We have seen time and time again that when new technologies emerge, they can create both buzz among investors and false claims from those claiming to use these new technologies.”
Securities and Exchange Commission (SEC) Chairman Gary Gensler made the comment as he announced settlements against two investment firms over allegations that they engaged in “AI (Artificial Intelligence) washing” and other unlawful practices.
In an article for techopedia.com, Margaret Rouse says that “washing is a strategy for tailoring a product or service to current trends to make it more attractive.”
I’ve written before about “greenwashing,” which, according to the Environmental Protection Agency, occurs when companies make vague or generic claims about products like “eco-friendly,” “eco-friendly” or “green” that they don’t back up.
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Rouse defines AI washing as “a deceptive promotional practice that exaggerates or outright lies about a product or service’s use of AI.” She cites a number of motivations for engaging in AI washing, including increasing consumer interest, justifying a higher price, and staying competitive in a rapidly changing market. It has also been found to increase investor interest in companies.
Four Things to Look Out For Deceptive ‘AI Washing Practices’
In an article for Forbes, futurist Bernard Marr lists the following ways companies are trying to AI-wash their products and services:
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Exaggerate their capabilities – implying that their AI models and algorithms are more powerful, useful or flexible than they actually are.
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Use the term “intelligent” in a misleading way – when in fact the software does not use algorithms that are able to learn and make decisions without being explicitly programmed how to do so.
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Offer very vague definitions – not specifically explaining which elements are “intelligent” and which rely on traditional software methodologies or human input.
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Downplay the amount of human input involved – either on the part of the service provider or the user.
Consumers should start with a certain level of skepticism about AI
In August 2023, the FTC shut down a company that raked in $22 million by selling a business opportunity that they claimed “AI integrates machine learning into the automation process, resulting in higher revenues and margins.” The FTC is concerned that jargon like “machine learning” and “neural networks” make AI seem almost magical and enable AI washing and AI scams.
The SEC settled the two AI wash cases in March. It alleged that Delphia falsely claimed to use AI and machine learning that incorporated customer data into its investment process, and that Global Predictions falsely claimed to be the “first regulated financial AI advisor.” Neither company admitted to the charges, but agreed to pay a total of $400,000 in civil penalties.
Most of us don’t have the expertise to thoroughly evaluate a company’s claims about whether its products or services are powered by AI. The FTC says that simply using an AI tool in developing a product does not justify the claim that the product is powered by AI.
The advice from many experts is to start with a degree of skepticism about AI claims. Depending on how important the issue is to you, you may consider asking for evidence of how AI is being used in a product or service. If you are a company considering purchasing an AI product, involve your IT department or an IT expert in evaluating it.
Randy Hutchinson is president and CEO of Better Business Bureau of the Mid-South.
This article originally appeared on Nashville Tennessean: Artificial intelligence (AI) ‘washing’ is a new type of deception
