[Congressional Record Volume 170, Number 115 (Thursday, July 11, 2024)]
[Senate]
[Pages S5012-S5013]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 2715. Mr. ROUNDS submitted an amendment intended to be proposed by 
him to the bill S. 4638, to authorize appropriations for fiscal year 
2025 for military activities of the Department of Defense, for military 
construction, and for defense activities of the Department of Energy, 
to prescribe military personnel strengths for such fiscal year, and for 
other purposes; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. _____. USE OF ARTIFICIAL INTELLIGENCE BY REGULATED 
                   FINANCIAL ENTITIES.

       (a) Definitions.--In this section:
       (1) AI test project.--The term ``AI test project'' means a 
     financial product or service that falls under the 
     jurisdiction of a financial regulatory agency--
       (A) uses artificial intelligence; and
       (B) is or may be subject to a Federal regulation or Federal 
     statute.
       (2) Artificial intelligence.--The term ``artificial 
     intelligence'' has the meaning given the term in (15 U.S.C. 
     9401).
       (3) Federal securities laws.--The term ``Federal securities 
     laws'' means--
       (A) the Securities Act of 1933 (15 U.S.C. 77a et seq.);
       (B) the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
     seq.);
       (C) the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et 
     seq.);
       (D) the Trust Indenture Act of 1939 (15 U.S.C. 77aaa et 
     seq.);
       (E) the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
     seq.);
       (F) the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
     seq.); and
       (G) the Jumpstart Our Business Startup Act (Public Law 112-
     106; 126 Stat. 306).
       (4) Financial product or service.--The term ``financial 
     product or service''--
       (A) has the meaning given the term in section 1002 of the 
     Consumer Financial Protection Act of 2010 (12 U.S.C. 5481);
       (B) includes--
       (i) activities that are financial in nature, as defined in 
     section 4(k)(4) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1843(k)(4));
       (ii) any financial product or service provided by a person 
     regulated by the Commission, as defined in 1002 of the 
     Consumer Financial Protection Act of 2010 (12 U.S.C. 5481); 
     and
       (iii) includes the offer or sale of any security subject to 
     the Federal securities laws
       (C) does not include the business of insurance.
       (5) Financial regulatory agency.--The term ``financial 
     regulatory agency'' means--
       (A) the Board of Governors of the Federal Reserve System;
       (B) the Federal Deposit Insurance Corporation;
       (C) the Office of the Comptroller of the Currency;
       (D) the Securities and Exchange Commission;
       (E) the Bureau of Consumer Financial Protection;
       (F) the National Credit Union Administration; and
       (G) the Federal Housing Finance Agency.
       (6) Regulated entity.--The term ``regulated entity'' means 
     an entity regulated by any financial regulatory agency.
       (b) Regulatory Sandboxes.--
       (1) Establishment.--Each financial regulatory agency shall 
     establish a regulatory sandbox that allows regulated entities 
     to experiment with AI test projects without unnecessary or 
     unduly burdensome regulation or fear of retroactive 
     enforcement actions.
       (2) Applications.--
       (A) Submission.--
       (i) In general.--A regulated entity may submit to each 
     appropriate financial regulatory agency an application, on a 
     form determined by the appropriate agency, to engage in an AI 
     test project.
       (ii) Contents.--An application submitted under clause (i) 
     shall include--

       (I) an alternative compliance strategy that proposes a 
     method to comply with the agency regulations and Federal 
     statutory requirements, including an explanation as to why 
     such modification is essential to the operation of the 
     entity;
       (II) a demonstration that under the strategy described in 
     subclause (I), that the AI test project--

       (aa) would serve the public interest, improve consumer 
     access to a financial product or service, or promote consumer 
     protection;
       (bb) would enhance efficiency or operations, foster 
     innovation or competitiveness, improve risk management and 
     security, or enhance regulatory compliance;
       (cc) would not present a systemic risk to the financial 
     system of the United States;
       (dd) continues to meet the purposes of the anti-money 
     laundering and countering the financing of terrorism 
     obligations under subchapter II of chapter 53 of title 31, 
     United States Code; and
       (ee) would not present a national security risk to the 
     United States

       (III) propose a date on which an AI Test Project would 
     terminate and explain why such termination date would be 
     appropriate; and
       (IV) an estimate of the economic impact of the AI test 
     project if approved.

       (iii) Joint applications.--Two or more regulated entities 
     may submit a joint application under clause (i).
       (B) Agency review.--
       (i) In general.--Except as provided in clause (v), not 
     later than 60 days after the date on which an application is 
     submitted to an agency under subparagraph (A), the agency 
     shall--

[[Page S5013]]

       (I) review the application; and
       (II) submit to the applicant in writing a determination of 
     the agency.

       (ii) Approval.--

       (I) In general.--If the applicant shows that it is more 
     likely than not that the application meets the requirements 
     for establishing an alternative compliance strategy and meets 
     the requirements described in subparagraph (A)(ii)(II), the 
     agency shall approve the application.
       (II) Effect of approval.--Beginning on the date on which an 
     application submitted under subparagraph (A) is approved--

       (aa) an agency that is not a party to an alternative 
     compliance agreement entered into under this section--
       (AA) may not attempt to enforce, including making a matter 
     requiring attention or a matter requiring immediate 
     attention, against the entity who is party to the agreement 
     for activities in the test project and
       (BB) may continue to enforce, against the entity who is 
     party to the agreement, any regulation or Federal law over 
     which the agency has enforcement authority that has not 
     included in the agreement; and
       (bb) the financial regulatory agency that approved the 
     application shall notify any other financial regulatory 
     agency of the approval.

       (III) Rule of construction.--Nothing in this clause may be 
     construed to limit the authority of a financial regulatory 
     agency to take an enforcement action against an applicant 
     with respect to fraud relating to the AI test project.

       (iii) Denial.--

       (I) In general.--If an agency denies an application 
     submitted under subparagraph (A), the agency shall--

       (aa) submit to the applicant a written notice explaining 
     the reason for denial, including evidence that the applicant 
     did not satisfy the requirements for establishing an 
     alternative compliance strategy and the baseline used by the 
     agency to measure the likely economic consequences of 
     rejecting the application; and
       (bb) provide the applicant a reasonable amount of time, but 
     in no case earlier than 30 days after issuance of the written 
     notice of denial, before the agency takes an enforcement 
     action against the applicant.

       (II) Resubmittals.--Each time an application submitted 
     under subparagraph (A) is denied, the regulated entity may 
     submit another application if the application is not 
     substantially similar to the one denied.
       (III) Injunctive relief.--If a financial regulatory agency 
     determines an AI test project presents an immediate danger to 
     consumers or presents a risk to financial markets, the agency 
     may file a civil action in an appropriate court seeking to 
     enjoin such project.
       (IV) Rule of construction.--Nothing in this clause may be 
     construed to limit the authority of a financial regulatory 
     agency to take an enforcement action against an applicant 
     with respect to fraud relating to the AI test project.

       (iv) Extension.--If the financial regulatory agency needs 
     additional time, the agency may vote to extend the 
     application deadline by 90 days. After the expiration of the 
     90-day period, if the agency has not made a determination on 
     the application, the application will automatically be deemed 
     approved and effective.
       (C) Data security.--All data supplied by sponsors of AI 
     test projects submitted under this section shall be stored in 
     a secure manner.
       (D) Regulations.--Not later than 180 days after the date of 
     enactment of this Act, each financial regulatory agency shall 
     promulgate regulations that--
       (i) shall be published in the Federal Register and provide 
     a 45-day period for public notice and comment;
       (ii) include--

       (I) procedures for modifying the AI test projects that are 
     approved by the agency;
       (II) consequences for failure to comply with set terms;
       (III) termination dates not earlier than 1 year after the 
     date on which AI test projects are approved;
       (IV) procedures to extend the termination date described in 
     subclause (III); and
       (V) procedures for confidentiality.

       (c) Report.--Each financial regulatory agency shall submit 
     to the Committee on Banking, Housing, and Urban Affairs of 
     the Senate and the Committee on Financial Services of the 
     House of Representatives an annual report on the outcomes of 
     AI test projects.
       (d) Regulations.--After approving not fewer than 1 AI test 
     project, an agency may promulgate regulations, after 
     providing an notice and an opportunity for public comment, 
     other activities in other areas that qualify as AI test 
     projects.
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