S.Amdt. 2715

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--

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(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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