•🛟 AI Check In: Winning AI Vendor Due Diligence & SEC’s New AI Crackdown

👋 Welcome, Abbie here.

The AI Check In is your playbook for navigating AI governance and strategy in banking and finance. This weekly newsletter isn’t just a guide—it’s your next power play.

I observe how AI missteps might derail careers, reputations and even institutions.

My goal? To arm you with the knowledge and tools to not just survive but rise up in the rapidly evolving AI-driven financial world.

Each weekly edition arms you to rewrite the rules, outmaneuver competitors, and stay two steps ahead of regulators.

Here’s what to expect this week:

• 🛟 Need to Know: SEC’s tightening grip on AI governance in 2025

• 🥷 Deep Dive: The art of using due diligence for vendor control

• ⚔️ Instruments of Mastery: LogicManager

• 📈 Trends to Watch: The rising tide of scrutiny on third-party vendors 

Let the games begin.

🛟 Need to Know: SEC’s 2025 Priorities

Over the past few weeks, the SEC has shared its FY25 Examination Priorities. Here’s what it means for your AI in banking and finance initiatives.

• Transparency and Disclosures: The SEC’s disdain for "AI washing" is an opportunity to craft narratives that meet regulatory expectations while strategically communicating your AI capabilities. Truthful does not mean revealing your full hand; disclosures should satisfy the rules without compromising proprietary strategies.

• Systemic Risks: The SEC is wary of herd behavior among firms relying on similar AI models. Institutions should prepare for this scrutiny by demonstrating how their AI systems are unique, robust, and insulated from the failures of others—positioning themselves as leaders rather than followers in the market.

• AI in Advisory Services: The SEC seeks to control how AI shapes decision-making in portfolio management, trading, marketing, and compliance. Firms must balance innovation with the SEC's demand for fiduciary adherence, ensuring AI tools serve the institution's interests without triggering compliance alarms.

• Risk Management and Controls: Policies must not only exist but demonstrate resilience under SEC examination. AI models should be calibrated to avoid obvious pitfalls—misaligned predictions, unresolved conflicts, or detectable fraud—while shielding competitive edges from overexposure.

🥊 Your Move: These SEC priorities aren’t lip service. This is the actual playbook for the regulators watching you. Anticipate where they might tighten scrutiny next and shape your compliance strategy to box competitors into costly adjustments. 

The full SEC release can be found here.

🥷 Deep Dive: AI Vendor Due Diligence and Risk Management: A Power Playbook for Banks and Other Financial Institutions

The right AI vendor is more than a partner—they are a critical cog in your strategy to dominate an increasingly digitized financial sector while evading regulatory pitfalls. Navigating this high-stakes landscape requires cunning questions and calculated best practices. Here’s how to weaponize due diligence.

Key Questions to Dissect AI Vendors

1. Can They Withstand Scrutiny on Transparency?
   Probe into the depths of their algorithms and data sources. Transparency isn’t just about ethics—it’s about control. Use their disclosures to uncover potential biases that regulators might exploit against you.

2. How Secure is Their Fortress?
   Grill them on data security practices. Do they meet GDPR, CCPA, or equivalent standards? Vendors who hedge here are liabilities, exposing you to breaches that regulators—and competitors—will pounce on.

3. What’s Their True Track Record?
   Forget flashy pitches. Demand hard proof: industry-specific case studies, regulatory testimonials, and evidence of success in banks like yours. Vendors with a history of overpromising and underdelivering? Leverage their desperation for free pilots with undefined endpoints, steep discounts or walk away.

4. What’s Their Compliance Strategy?
   Cross-examine their knowledge of regulatory landscapes like the U.S. Department of the Treasury, US Securities & Exchange Commission and other institutional or regulatory bodies. Vendors who can’t evolve with compliance requirements will drag your institution into the mud.

5. Are They Truly Invested in You?
   Evaluate their support. Are they offering tailored training and proactive troubleshooting, or just lip service? If regulations change, will they train your team again. Vendors who under-deliver here make excellent scapegoats in the event of AI missteps.

Strategic Best Practices for AI Risk Control

1. Play the Long Game with Risk Assessments
   Assess every vulnerability in their AI stack, from data practices to algorithmic robustness to their own third party suppliers. Look for business continuity assurance. This isn't paranoia—it’s preemption. Turn every weakness you find into leverage during contract negotiations.

2. Win in Contract Negotiations
   Contracts are war plans. Lock in favorable terms for data ownership, compliance accountability, and liability caps. Vendors that balk at detailed agreements are waving red flags—use this to squeeze better terms or walk away with their secrets to use with the next vendor.

3. Continuous Monitoring as a Tactic
   Treat monitoring as an intelligence operation. Regular audits, surprise reviews, and detailed documentation keep vendors accountable. Vendors who under-deliver aren’t just risks. They’re liabilities that now owe you.

4. Embed AI Risk Into Broader Governance
   Use frameworks like the “three lines of defense” to position AI governance within your broader risk management strategy. This makes AI issues just another piece of the compliance puzzle—easy to isolate, mitigate, and exploit for advantage.

5. Exploit Explainable AI (XAI)
   Vendors who can’t explain their AI decisions are handing you a public relations disaster waiting to happen. Insist on XAI not just for compliance but for internal control over AI’s decision-making power.

6. Stay Ahead of Regulators
   Regulators often act after the fact. Stay two steps ahead by tracking updates from the SEC, the U.S. Department of the Treasury, and international authorities. Shape your compliance strategy to pre-empt their actions and keep competitors scrambling.

🥊 Your Move: Turn Risk into Opportunity

Mastering vendor due diligence is about more than risk management—it’s about leveraging that knowledge to dictate the terms. Focus on turning that red flag of danger into a white flag of capitulation. Control the game, neutralize threats, and secure your position at the top of the financial battlefield.

⚔️ Instruments of Mastery: LogicManager

LogicManager is not just a tool—it’s your strategic advantage in the high-stakes game of banking oversight.

In an era where vendors can make or break your institution, this AI-powered risk management arsenal ensures you remain in control.

• Master Vendor Oversight: LogicManager’s Vendor Management System enables ruthless due diligence. Customizable risk assessments and automated analysis expose vulnerabilities, turning what others overlook into your leverage.

• Command Contracts with Precision: Its Risk Analyzer AI dissects contracts, uncovering weak clauses and ensuring compliance without wasting time on tedious manual reviews. Every detail is a potential advantage, and LogicManager ensures you never miss one.

• Dominate with Integration: Seamlessly connect to over 500 tools, while real-time compliance tracking fortifies your ability to adapt and act swiftly. LogicManager isn’t just about keeping up—it’s about staying ahead.

In the regulatory chessboard of AI-driven finance, LogicManager transforms vendor risk management into a weapon of institutional dominance.

While others stumble in response to risks, you’ll already be moving your next piece. Let them scramble—this is your edge.

Click here for more on LogicManager for Banking

📈 Trends to Watch: The Rising Tide of Third-Party Vendor Scrutiny 

As regulators like the OCC and Federal Reserve tighten the noose on third-party vendors, this isn’t a compliance exercise—it’s a battlefield strategy that institutional dominance needs to win.

This trend demands comprehensive due diligence to expose vulnerabilities, airtight contracts to lock down accountability and maintain control, and relentless monitoring to preempt threats.

As banks increasingly outsource for operational efficiency, they inherit hidden dangers—cybersecurity breaches, compliance failures, and reputational risks.

To maintain dominance, if you decide to go third party, banking leaders must transform vendor risk management into a fortress, driving operational integrity while staying one step ahead of regulatory crosshairs.

🥊 Your Move: Ruthless Third-Party Vendor Oversight

1. Exploit Due Diligence as Leverage: Dive deep into vendors’ operations, uncovering weaknesses in their cybersecurity, compliance practices, and financial health. Use these insights to negotiate favorable terms or expose their vulnerabilities to drive better deals—or eliminate them as potential liabilities.

2. Weaponize Contracts: Forge contracts that not only bind vendors to strict compliance but also position you to act decisively at the first sign of failure. Build in clauses that enable audits, enforce penalties, and allow immediate termination to maintain your upper hand.

3. Dominate with Continuous Surveillance: Establish a relentless monitoring system, keeping vendors under constant scrutiny. Use advanced tools to anticipate failures and respond proactively, ensuring you remain in control and unshaken by external missteps.

The AI battlefield is yours to conquer. Keep sharpening your edge, and we’ll see you next week with more tools to dominate.

🔮 Next Week

We explore how Operational Robustness and Resilience are the cornerstone of every AI initiative in banking and finance. I’ll talk you through how to build or bury any AI initiative that crosses your desk.

Yours,

Disclaimer:

This newsletter is for informational, entertainment and educational purposes only and should not be considered financial, legal, or investment advice. Some content may include satire or strategic perspectives, which are not intended as actionable guidance. Readers should always consult a qualified professional before making decisions based on the material presented