The term “AI washing” has emerged as a major concern in recent years, paralleling the previously established concept of “greenwashing.” Just as greenwashing involves misleading claims about a company’s environmental practices, AI washing involves exaggerating or falsifying the use of artificial intelligence (AI) in products, services, or processes. This poses significant risks for organizations, particularly for risk and internal audit professionals who are entrusted with safeguarding the integrity and reputation of the organization.
What is AI Washing?
AI washing is the deceptive practice of overstating or fabricating the use of AI in marketing materials, product descriptions, or public statements. This can manifest in several ways:
- Implying AI when none exists: Some companies claim their products are “powered by AI” or use “AI technology” when their actual functionalities rely on more traditional algorithms or rule-based systems.
- Exaggerating AI capabilities: Companies might tout the “self-learning” or “autonomous decision-making” capabilities of their AI, even though these features are limited or nonexistent.
- Using AI buzzwords without substance: Marketing materials may include terms like “machine learning,” “deep learning,” or “neural networks” without any concrete explanation of how these technologies are actually employed.
Why is AI Washing a Problem?
AI washing poses several risks for organizations, including:
- Regulatory Compliance: Misrepresenting AI capabilities can lead to non-compliance with regulatory requirements, such as the European Union’s General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). These regulations require companies to be transparent about the use of AI and its impact on data privacy.
- Reputational Damage: When AI washing comes to light, it can significantly damage an organization’s reputation and erode public trust. Consumers, investors, and business partners may lose faith in the company’s honesty and transparency, leading to boycotts, divestment, and decreased market share.
- Legal Risks: False or misleading claims about AI can expose companies to legal challenges, including lawsuits from consumers, competitors, or regulatory bodies. These lawsuits can result in substantial financial penalties and damage control efforts.
- Security Risks: Overstating the capabilities of AI can lead to overconfidence in its effectiveness, potentially leaving vulnerabilities unaddressed. This can expose an organization to cyberattacks and other security risks.
- Misallocation of Resources: Investing in AI-washing initiatives instead of actual AI development can lead to wasted resources and missed opportunities. Organizations may fall behind competitors who are genuinely investing in and leveraging AI technologies.
How Can Internal Auditors Address AI Washing?
Risk and internal audit professionals play a critical role in identifying and mitigating the risks associated with AI washing. Here are some key steps they can take:
Increase Awareness: Educate themselves and their colleagues about AI washing and its potential consequences. Stay updated on the latest regulatory developments and best practices.
Assess AI Claims: Scrutinize all claims related to AI within the organization. Analyze product descriptions, marketing materials, and public statements to identify potential exaggerations or misleading information.
Develop Clear AI Guidelines: Establish clear internal guidelines for the use of AI terminology and ensure that all communication regarding AI is accurate and truthful.
Conduct Independent Reviews: Engage external experts to conduct independent reviews of AI claims and ensure their validity.
Implement Monitoring and Reporting Mechanisms: Develop robust monitoring systems to detect and prevent AI washing. Establish clear reporting channels for employees to raise concerns about potential misrepresentation of AI capabilities.
Collaborate with other stakeholders: Partner with other departments, such as marketing and legal, to ensure a coordinated approach to addressing AI washing concerns.
Advocate for Transparency: Promote transparency in the organization’s use of AI. Clearly communicate the limitations of AI technology and avoid overhyping its capabilities.
Be Proactive on AI Washing
AI washing is a serious issue with significant consequences for organizations. By proactively addressing this issue and taking concrete steps to mitigate its risks, risk and internal audit professionals can play a crucial role in protecting their organizations’ reputation, compliance, and overall well-being. By remaining vigilant, informed, and collaborative, they can help ensure that AI is used responsibly and ethically within their organizations. 
Joseph McCafferty is editor & publisher of Internal Audit 360°.