October 29, 2024
This week decoded
Despite the nearly singular focus on the U.S. general election in 7 days, there were major advances in significant rulemaking this week, including:
- Treasury issued its final rule to implement the Executive Order on outbound investment by countries of concern in semiconductors, microelectronics, quantum information technologies, and artificial intelligence.
- President Biden issued a first-ever National Security Memorandum and Framework to advance AI governance and risk management in national security.
- CFPB released its final rule on personal financial data rights enacting Dodd-Frank Act section 1033.
- CFPB also issued guidance that companies using third-party consumer reports and AI or algorithmic scores about their workers are subject to FCRA.
- DOJ published a notice of proposed rulemaking to restrict countries of concern from purchasing Americans’ sensitive personal data.
- DHS temporarily waived the requirement that digital IDs comply with REAL ID.
Read more below
Congress
Hearings
- Congress is in recess until November 15.
Legislation
- Congress is in recess until November 15.
Correspondence
- There was no relevant correspondence this week.
Reports
- The Committee on House Administration released its October 2024 Flash Report on Artificial Intelligence (AI), part of a series on the use of AI technology by House offices and Legislative Branch agencies. (Report)
Biden-Harris Administration
White House
- President Biden issued a first-ever National Security Memorandum (NSM) and released a Framework to Advance AI Governance and Risk Management in National Security.
- The NSM, entitled, “Memorandum on Advancing the United States’ Leadership in Artificial Intelligence; Harnessing Artificial Intelligence to Fulfill National Security Objectives; and Fostering the Safety, Security, and Trustworthiness of Artificial Intelligence.” It “directs the U.S. Government to implement concrete and impactful steps to (1) ensure that the United States leads the world’s development of safe, secure, and trustworthy AI; (2) harness cutting-edge AI technologies to advance the U.S. Government’s national security mission; and (3) advance international consensus and governance around AI.” (NSM) (Fact sheet)
- The AI Framework contains four pillars relating to: 1) Identifying prohibited and “high-impact” AI use cases based on risk to national security and AI use cases that impact Federal personnel; 2) Creating robust minimum-risk management practices for high-impact AI; 3) Cataloguing and monitoring high-impact AI use; and 4) Ensuring training and accountability mechanisms. (Framework)
Department of the Treasury
- Treasury issued its final rule to implement Executive Order 14105 “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern,” also known as the outbound order. The rule prohibits U.S. persons from engaging in certain transactions with persons of a country of concern involving technologies and products that pose a “particularly acute national security threat” to the United States. The rule also requires U.S. persons to notify Treasury of other transactions with persons of a country of concern involving technologies and products that may contribute to the threat to the national security of the United States. Countries of concern include the People’s Republic of China, the Special Administrative Region of Hong Kong, and the Special Administrative Region of Macau. The technologies and products subject to the prohibition and notification requirement are semiconductors, microelectronics, quantum information technologies, and artificial intelligence.
- Treasury will implement the rule through the Outbound Investment Security Program, administered by a new Office of Global Transactions within Treasury’s Office of Investment Security. The final rule will be effective on January 2, 2025. (Final rule)(Press release)(Key information)(White House Fact Sheet)
Consumer Financial Protection Bureau (CFPB)
- The CFPB released its final rule on “Personal Financial Data Rights” enacting Dodd-Frank Act section 1033. According to the CFPB, the final rule will “give consumers greater rights, privacy, and security over their personal financial data” by allowing consumers to more easily “fire fintechs and banks that provide lousy service,” “shop for better rates on products and credit,” and “make secure payments,” while also “banning bait-and-switch data harvesting” and “creating revocation and deletion rights.” (Press release)(Final rule)
- The CFPB also issued guidance that “companies using third-party consumer reports — including background dossiers and surveillance-based, ‘black box’ AI or algorithmic scores about their workers — must follow Fair Credit Reporting Act (FCRA) rules.” (Press release)(Guidance)
Department of Justice (DOJ)
- DOJ published a notice of proposed rulemaking (NPRM) to restrict so-called countries of concern from purchasing Americans’ sensitive personal data. The proposed rule would require U.S. entities seeking to buy or sell personal information to enact approved data security and compliance programs. The rule also adds new exemptions for telecommunications services and pharmaceutical and medical device clinical trial data. (NPRM)
Cybersecurity and Infrastructure Security Agency (CISA)
- In connection with the DOJ proposed rule, CISA released a request for comment on the “development of security requirements for restricted transactions as directed by Executive Order (E.O.) 14117, ‘Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern.’” The notice is scheduled to be published in the Federal Register on October 29, 2024, with a 30-day comment period. (Request for Comment)
Securities and Exchange Commission (SEC)
- SEC released its 2025 examination priorities, including a section focused on emerging technologies, stating, “With respect to AI, the Division will review registrant representations regarding their AI capabilities or AI use for accuracy. In addition, the Division will assess whether firms have implemented adequate policies and procedures to monitor and/or supervise their use of AI, including for tasks related to fraud prevention and detection, back-office operations, anti-money laundering (AML), and trading functions, as applicable” (Press release)(Report)
Department of Homeland Security (DHS)
- DHS issued a final rule amending REAL ID regulations to waive, on a temporary and State-by-State basis, the regulatory requirement that digital driver’s licenses (also called mobile driver’s licenses, or mDLs) must be compliant with REAL ID requirements. (Rule)
Department of Commerce
- Commerce published a notice soliciting applications for membership on the National Advisory Council on Innovation and Entrepreneurship (NACIE), which advises the Secretary of Commerce on matters related to accelerating innovation and entrepreneurship, advancing the commercialization of research and development, promoting workforce development, and other related matters. Applications are due December 15, 2024. (Notice)
Noteworthy Quotes and Events
Administration
White House
- CFPB Section 1033 Final Rule: National Economic Adviser Lael Brainard said in a statement, “Today, the Biden-Harris Administration is ensuring that consumers are in control of their own financial data. The new rule will make it easier for consumers to switch banks and use financial services that better fit their needs, provide greater opportunity for innovative new businesses to compete, and lower costs for consumers.”
- Biden NSM on AI: In remarks on AI and national security before the National Defense University, Assistant to the President for National Security Affairs Jake Sullivan stated, “The stakes are high. If we don’t act more intentionally to seize our advantages, if we don’t deploy AI more quickly and more comprehensively to strengthen our national security, we risk squandering our hard-earned lead. Even if we have the best AI models but our competitors are faster to deploy, we could see them seize the advantage in using AI capabilities against our people, our forces, and our partners and allies. We could have the best team but lose because we didn’t put it on the field.” (Prepared remarks)
Department of the Treasury
- On the release of the final rule implementing the outbound order, Paul Rosen, Assistant Secretary for Investment Security, said, “The Biden-Harris Administration is committed to protecting America’s national security and keeping critical advanced technologies out of the hands of those who may use them to threaten our national security. Artificial intelligence, semiconductors, and quantum technologies are fundamental to the development of the next generation of military, surveillance, intelligence and certain cybersecurity applications like cutting-edge code-breaking computer systems or next generation fighter jets. This Final Rule takes targeted and concrete measures to ensure that U.S. investment is not exploited to advance the development of key technologies by those who may use them to threaten our national security. U.S. investments, including the intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities. Secretary Yellen has overseen and directed Treasury’s extensive engagement with stakeholders, experts, and allies to ensure the effectiveness of this measure, and that the rule will not jeopardize the open investment environment that benefits the United States.” (Press release)
Consumer Financial Protection Bureau (CFPB)
- CFPB Director Rohit Chopra delivered remarks at the Federal Reserve Bank of Philadelphia on CFPB’s final rule on Personal Financial Data Rights, saying, “To make our banking and payments market more competitive, it needs to be open and decentralized using a common set of data standards, free of powerful gatekeepers and middlemen that can impose private regulations and extract fees… One foundational aspect is to ensure that incumbents can’t block consumers from controlling and porting their personal financial data. In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1033 gives consumers new rights to access their personal financial data in a standardized format, subject to the rules of the CFPB. Since the CFPB never finalized any rules, it was essentially a dead letter. Our final rule today is our first significant rule using this dormant authority.” (Prepared remarks)
- CFPB Director Rohit Chopra delivered remarks at the release of their guidance on worker surveillance. He summarized the rule with, “The CFPB’s issuance outlines how modern-day tracking reports used by employers must follow the Fair Credit Reporting Act. American workers have certain crucial rights when companies use employment dossiers. First, workers must consent when employers purchase these reports for use in employment contexts. Second, if an employer relies on these dossiers to take an adverse action against a worker—such as firing, denial of a promotion, or reassignment—they must provide a detailed explanation to the individual. Third, when a worker disputes inaccurate, incomplete, or unverifiable information, companies must delete or correct it. Finally, employers cannot misuse worker reports for illegal purposes, such as selling it on the open market or using it to market financial products to workers. These transparency and accountability protections explicitly extend not only to hiring, but also to ongoing employment decisions such as demotions or reassignments. In short, workers are protected not just by federal labor law, but other fair dealing laws.” (Prepared remarks)
Export-Import Bank (EXIM)
- In an address to the Gulf Information Technology Exhibition (GITEX) in the United Arab Emirates, EXIM President and Chair Reta Jo Lewis said, “EXIM’s $2.3 billion of support for AI, quantum computing, and digital sectors, demonstrates the EXIM’s commitment to supporting America’s technological leadership and American companies as they compete in the global marketplace.” (Press release)
Multiple Agencies
- The Internal Revenue Service Chief of Artificial Intelligence, NASA Chief Data Officer and Chief Artificial Intelligence Officer, and Deputy Director of the Certification & Testing Division and Assistant Secretary for Technology Policy, Office of the National Coordinator for Health Information Technology joined experts from the private sector in a webinar hosted by the Federal Executive Forum entitled, “Artificial Intelligence Strategies in Government Progress and Best Practices 2024.” (Webinar)
Department of Justice (DOJ)
- A senior DOJ official said about the DOJ revised proposed rule on sensitive data, “Under the proposed rule, U.S. persons transacting in these kinds of data will need to establish a compliance program based on the individual risk profile of their activities. They will need to understand the kinds and volumes of data they transact, who they are doing business with and how that data is being used, and the safeguards they use to control access to that data.” (Cyberscoop)
Congress
- On the CFPB Section 1033 Final Rule, House Financial Services Chair Patrick McHenry (R-NC) said, “The CFPB’s final 1033 rule is a promising step forward to protect Americans’ financial data privacy. As Republicans have said for years, Americans should have greater control over their sensitive financial data. Consumers should know where their data is going, how it’s used, and be able to terminate collection of their data by certain firms. This rule is similar to Republicans’ Data Privacy Act. Director Chopra also listened to some of our concerns regarding unreasonable restrictions on the secondary use of consumer data. This is progress for American innovation and consumers, but we can’t stop here. Congress must build on the bipartisan consensus regarding financial data privacy. It’s critical that we make these protections permanent by passing Republicans’ Data Privacy Act of 2023.” (Press release)
- Senate Select Committee on Intelligence Chair Mark Warner (D-VA) released a statement in response to President Biden’s NSM on AI, in which he said, “…as the chair of the Senate Intelligence Committee I am also acutely aware of the many threats to our AI efforts. I encourage the administration to work in the coming months with Congress to advance a clearer strategy to engage the private sector on national security risks directed at AI systems across the AI supply chain.” (Statement)
- On the Biden NSM on AI, Rep. Don Beyer (D-VA) tweeted, “Encouraged by White House actions to improve federal AI policy and responsible AI development. But, Congress must act on essential legislation like my and Rep Anna Eshoo’s CREATE AI Act to codify the NAIRR as a national research infrastructure, as highlighted in POTUS’ memo.”
- Rep. Elise Stefanik (R-NY) published an op-ed in Real Clear Defense calling for the Department of Defense (DOD) to adopt (and Congress to fully fund) the Defense Advanced Research Projects Agency’s (DARPA) Quantum Benchmarking Initiative program, DOD to enact a DARPA strategic framework (included in the House-passed NDAA), and DOD to engage with the larger quantum ecosystem. (Op-ed)(Press release)
- Sen. Mike Rounds (R-SD) tweeted, “The use of artificial intelligence is alive and well in South Dakota. Good to speak with folks at the AiEDGE summit in Sioux Falls today about the federal government’s role in legislating AI guidelines while still promoting innovation.”
- Sen. John Hickenlooper (D-CO) tweeted, “Our AI future is already here. We need AI literacy training to equip our workers with the skills they need to reap all the benefits of AI in the workplace.”
- Rep. Derek Kilmer (R-WA) tweeted, “The intentional use of AI to create and spread deceptive content threatens the very fabric of our electoral integrity. That’s why I’m leading bipartisan legislation to bipartisan legislation to safeguard the integrity of federal elections.”
- Rep. Don Beyer (D-VA) tweeted, “The impacts of AI, both positive and negative, are profound and require forward-looking solutions to help our country reap the benefits of AI while ensuring we safeguard against risks. AI has immense potential but we need to get this right, and we have no time to lose.”
- Rep. Hillary Scholten (D-MI) tweeted, “AI Imaging is changing the way clinicians diagnose and treat breast cancer – saving lives in the process. Thank you to Advanced Radiology for welcoming me to check out your cutting-edge diagnostic system.”
- Rep. Michelle Steel (R-CA) tweeted, “As a member of the AI Task Force, I know AI can be a pathway to the future for sectors like business, education, and public safety. I’m fighting to ensure that American businesses and institutions have access to this tool and can use it to grow our economy.”
- Rep. Valerie Foushee (D-NC) tweeted, “It was a pleasure to discuss the future of Artificial Intelligence alongside Rep Deborah Ross at the NCCU Law & Technology Summit. AI holds immense potential for progress & we must take proactive steps to ensure the benefits are realized in a secure, equitable, & ethical manner.”
- Rep. Tom Kean (R-NJ) tweeted, “Artificial intelligence technology is improving every day and is now able to generate image, video, audio, multimedia, and text content that is almost imperceptible to content created by humans. In order to maintain privacy and safeguard intellectual property, more transparency is needed when people use artificial intelligence. The AI Labeling Act is a major step towards making sure artificial intelligence tools are used in a productive way by allowing users to know when their content is AI generated.
- Sen. Ron Wyden (D-OR) tweeted, Great conversations today with AI Portland, techoregon & wacom about AI’s impact on jobs, housing, healthcare & technology in Oregon & nationwide. Huge credit to Megnotarte & Nicole Mors for starting AI Portland — a grass-roots group of smart & engaged Oregonians.”
- Sen. Cynthia Lummis (R-WY) tweeted, “Thrilled to be named one of unstoppablewow3’s Most Inspirational Women of Web3 & AI in 2024! Congratulations to all the other incredible women making huge contributions to Web3 and AI.
- Rep. Sylvia Garcia (D-TX) tweeted, “TeamGarcia was in DC today for an AI and Robotics Summit, learning how AI will revolutionize manufacturing and affect our workforce. We’re focused on staying ahead and making sure our community benefits from these innovations.”
- Rep. Brittany Pettersen (D-CO) tweeted, “It was great to speak at the GoWestCUA MAXX Conference in Aurora. Credit unions are essential for providing access to financial services and fostering trust. I was proud to speak about my bipartisan work on financial transparency, AI, and leveling the playing field for all.”
- Rep. Chuck Fleischmann (R-TN) tweeted, “At Chattanooga Connect 2024, I met with industry leaders, researchers, and local business owners to discuss how Chattanooga and our entire TN03 community are leading the way in developing new technologies like AI, quantum computing, and more. As Chairman of Energy and Water Appropriations, I will always work closely with our community’s leaders and entrepreneurs to ensure the federal government is a helpful partner, not a roadblock with big government regulation, red tape, and taxes.”
- Rep. Ami Bera (D-CA) was interviewed on the POLITICO Tech podcast about AI and the future of health care. (Segment: How one doctor-turned-lawmaker wants to regulate AI.
- Rep. Gabe Amo (D-RI) tweeted, “Teachers should be able to harness the power of artificial intelligence & students must learn how to effectively and responsibly use it. Watch a discussion on NBC10’s AI and You Townhall where I joined Jim Langevin and MyRWU Professor Joseph Roberts.”
About Zero One Strategies
Zero One Strategies is a boutique government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
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