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North American Edition
22nd September 2022
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Concern about New York’s landmark AI bias law
New York City’s landmark mandate for audits of artificial intelligence systems used in hiring is posing some compliance challenges because, unlike familiar financial audits that have been refined over many years of accounting experience, the AI audit process is new and without clearly established guidelines. “There is a major concern, which is it’s not clear exactly what constitutes an AI audit,” observes Andrew Burt, managing partner at AI-focused law firm BNH. “If you are an organization that’s using some type of these tools . . . it can be pretty confusing.” The law, which comes into effect in January, will require local companies to conduct audits to assess biases, including along race and gender lines, in the AI systems they use in hiring. Nearly a quarter of companies’ human resources departments use automation, AI, or both to support HR activities, according to research that the Society for Human Resource Management published earlier this year. The number rises to 42% among companies with more than 5,000 employees. Lindsey Zuloaga, the chief data scientist at talent platform HireVue, which offers software that can automate interviews, warns that if companies aren’t careful, AI can “be very biased at scale. Which is scary.”
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Treasury seeks comment on crypto finance risks
The U.S. Treasury Department is seeking public comment on the possible illicit finance and national security risks posed by the use of digital assets, as part of the agency’s mandate under President Joe Biden’s March executive order to study the development of cryptocurrency. The Treasury, in a version of the request-for-comment document on the Federal Register website, said crypto has been used in sophisticated cybercrime-related financial networks and activity, including through ransomware. The growing use of digital assets has increased the risk of crimes such as money laundering, terrorist financing, fraud, thefts and corruption, according to the document. Brian Nelson, the Treasury under secretary for terrorism and financial intelligence, said in a statement that public input, which is invited ahead of a November 3rd deadline, will aid the agency in setting controls to hold bad actors accountable and to identify potential gaps in existing enforcement.
For third straight meeting, Fed lifts interest rates by 0.75 points
The Federal Reserve has raised its benchmark interest rate by 0.75 percentage points for the third straight meeting, lifting it to a range of 3%-3.25%, a level last seen in early 2008. The Fed's rate-setting Open Market Committee is widely expected to raise rates to between 4% and 4.5% by the end of this year, even as they acknowledge that this increases the risk of recession. “We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” Fed Chairman Jerome Powell said at a news conference after the rate decision. People are suffering from high inflation, he added, and they’ll ultimately suffer more, and for longer, if the Fed flinches in its commitment to pulling prices back down. "With the new rate projections, the Fed is engineering a hard landing — a soft landing is almost out of the question," said Seema Shah, chief global strategist of Principal Global Investors. "Powell’s admission that there will be below-trend growth for a period should be translated as central bank speak for 'recession.' Times are going to get tougher from here."
U.S. House Democrats probe PR firms' work for oil and gas companies
U.S. lawmakers are increasing their scrutiny of the oil and gas industry in hearings linked to investigations into advertising campaigns that misled the public about climate change. The House Natural Resource Committee's oversight panel, led by U.S. Representative Katie Porter of California, has held a hearing about the role of public relations firms in preventing climate action and has released a report detailing "deceptive" and "misleading" tactics they use for their client campaigns. Christine Arena, a former Edelman PR executive, told the hearing that PR firm campaigns on behalf of oil companies no longer deny climate change. "Fossil fuel marketers have shifted from denying or minimizing the science behind climate change to falsely suggesting that oil and gas are a central part of the climate-solutions mix," she said in her testimony.
McDonald's ordered to face $10bn discrimination lawsuit
U.S. District Judge Fernando Olguin has ordered McDonald's to defend against media entrepreneur Byron Allen's $10bn lawsuit accusing the fast-food chain of "racial stereotyping" by not advertising with Black-owned media. Mr. Allen  accused McDonald's of relegating his Entertainment Studios Networks Inc and Weather Group LLC, which owns the Weather Channel, to an "African American tier" with a separate ad agency and much smaller ad budget, depriving them of tens of millions of dollars of annual revenue. While not ruling on the merits, Olguin cited allegations that Entertainment Studios had since its 2009 founding tried repeatedly and unsuccessfully to obtain a contract from McDonald's, whose "racist" corporate culture harmed Mr. Allen. In a statement on Tuesday, McDonald's lawyer Loretta Lynch maintained that the Chicago-based company viewed the lawsuit as "about revenue, not race," and believed the evidence would show there was no discrimination. "Plaintiffs' groundless allegations ignore both McDonald's legitimate business reasons for not investing more on their channels and the company's long-standing business relationships with many other diverse-owned partners," she said.
PwC settles long-running pension lawsuit
PwC will pay $267m to settle a 16-year-old class action by retirees seeking higher pension benefits and challenging various aspects of the company’s pension plan. The deal, which is expected to pay an average of about $11,000 to each of 16,000 former participants in the PwC plan, is the largest recovery ever achieved in an Employee Retirement Income Security Act case challenging a pension calculation known as a “whipsaw,” plaintiff Timothy D. Laurent said in a settlement motion filed Monday. The PwC retirees’ suit challenged various aspects of their pension plan, including its stated retirement age and the interest rate used to calculate certain distributions. In particular, they claim PwC shorted their benefits by using faulty interest rates and normal retirement dates when performing whipsaw calculations, in which the value of workers’ pension benefits are projected forward to retirement age and then backward to the time of distribution.
False accuser of Black bird-watcher loses lawsuit against ex-employer
Amy Cooper, a white woman who falsely told police she was threatened by a Black bird-watcher in New York City's Central Park, has lost a lawsuit against her former employers.  A video of the incident went viral. She accused investment firm Franklin Templeton of illegally firing her and portraying her as racist. U.S. District Judge Ronnie Abrams rejected Cooper's claim that she was defamed when Franklin Templeton and its CEO referred on three occasions to the incident and said they did not tolerate racism.  The judge also said Cooper had not proved she was dismissed in May 2020 because of her race or gender, and without the kind of thorough investigation once done into a male employee's alleged offensive conduct.
Hedge fund trader can be extradited from U.K. to Denmark to face ‘cum-ex’ charges
A London court has said hedge fund trader Anthony Patterson can be extradited from the U.K. to Denmark to stand trial over allegations linked to the “cum-ex” dividend scandal, in which governments were duped into refunding billions of euros of dividend taxes that had never been paid. District judge Timothy Godfrey said Patterson should be sent to the Nordic country to be tried alongside Sanjay Shah. Patterson acted as an assistant to Shah, who is the alleged mastermind of the complex tax transactions, according to Danish authorities. Shah recently successfully blocked his extradition from Dubai to Denmark in a judgment that is being appealed. Days later, he was hit with a $1.26bn penalty in a related civil case. “I do not think that the question of Mr. Shah's extradition to Denmark is a closed book,” the judge said.
U.S. banks threaten to leave Carney’s green alliance over legal risks
JPMorgan, Morgan Stanley and Bank of America have threatened to leave Mark Carney’s Financial Alliance for Net Zero due to concerns about the legal risks to the banks from poor ESG reporting.  
U.S. bank chiefs warn of China exit if Taiwan is attacked
The CEOs of major U.S. banks including JPMorgan Chase, Bank of America and Citigroup said they will pull out of China if the U.S. government called for it in the event of an attack on Taiwan by Beijing. They made the pledge during an appearance in front of Congress when Republican congressman Blaine Luetkemeyer asked how they would respond were China to invade Taiwan. The bank chiefs also endorsed the Federal Reserve’s latest rate hike as a means to tame soaring inflation, while acknowledging there will be pain ahead.
Workers’ changed attitudes tighten labor market
Writing for the Wall Street Journal, Greg Ip says the pandemic has altered what job conditions, hours, and pay workers are willing to accept, and the effect is to make labor scarcer and more expensive than ordinary economic indicators typically show. However, this new attitude toward work, and the bargaining power it brings, might already be changing. Surveys show workers’ desired hours have recovered this year. In August, workforce participation was higher, and in early September the share of workers in the office climbed to a recent high of 47.5% of pre-pandemic levels, according to Kastle Systems.
Calpers lags behind other large pensions
Nicole Musicco, the new chief investment officer of the California Public Employees’ Retirement System, known as Calpers, has given an unusually candid presentation to board members which showed returns at the retirement system lagging behind other large pensions in almost every asset class during the past 10 years, with private equity trailing the most, 1.3 percentage points.  The presentation showed that in each year between 2009 and 2018, Calpers put $5bn or less in new money into private equity, an asset class that public pension funds have relied on heavily in recent years to boost returns.  “There isn’t one magic answer” to why Calpers underperformed, said Musicco. “The biggest impact by far was the 10 years we took a break from participating in private equity.”
U.S. tech firms in Kenyan talent war
Business Daily newspaper has reported that Microsoft, Amazon and Google are increasing their presence in East Africa, with Kenya as their hub, in moves that are resulting in monthly salaries of up to 1.8 million Shillings for principal tech specialists. Smaller local firms including Wasoko, Flocash, Twiga foods, Lori Systems, and Sendy, along with telcos and banks, cannot match the attractive packages offered by these U.S. technology giants, and as such their business plans are being hurt. In April, Google announced the opening of its first Africa product development centre in Nairobi. Meanwhile, Microsoft plans to invest $100m (1.2 billion Shillings) in technology development hubs in Kenya and also Nigeria, and launch large-scale hiring of engineers in both countries.
Credit Suisse considers splitting investment bank in three
Credit Suisse plans to split its investment bank in three and resurrect a “bad bank” for risky assets. The Swiss lender hopes to sell profitable units such as its securitised products business. “We have said we will update on progress on our comprehensive strategy review when we announce our third quarter earnings,” Credit Suisse said in a statement. “It would be premature to comment on any potential outcomes before then.”
Goldman Sachs hunts new revenues in EU transaction banking push
Goldman Sachs is expanding into transaction banking in the EU as part of a group-wide strategy under CEO David Solomon to grow beyond the lender’s core areas of trading and advisory.

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