On 14 February, US Securities and Exchange Commission (SEC) Chair Gary Gensler warned businesses engaging in AI washing against making false claims regarding their artificial intelligence (AI) capabilities.

Drawing a parallel with the agency’s crackdown on greenwashing, Gensler emphasised that securities law explicitly prohibits deceptive claims and mandates companies to provide disclosures that are “full, fair, and truthful.” But what exactly is AI washing?

AI washing has become an informal term, akin to greenwashing, referring to businesses making groundless AI related claims to the public.

The surge in the number and complexity of AI applications has raised concerns that marketing assertions may not align with the actual capabilities of the products.

The Federal Trade Commission (FTC) issued a warning in February 2023, alerting companies across various sectors about bogus AI claims within company advertising and marketing materials.

This includes exaggerations of AI-powered product capabilities and outright fabrications regarding the incorporation of AI technology.

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The SEC, known for cracking down on greenwashing by fund managers, has blocked funds from using names suggesting a focus on environmental, social, and governance issues if their portfolios did not align with those principles.

The phenomenon of AI washing has gained momentum due to the hype surrounding generative AI.

Businesses are increasingly making unfounded AI claims, similar to the practice of ‘cloud washing’.

This involves promoting products or services as ‘powered by AI’ without substantial AI integration, with the aim of creating an illusion of advanced technology.

For instance, companies may label a product as AI-powered merely because it uses a basic algorithm that vaguely falls under the umbrella of AI.

The lack of clarity in marketing materials can mislead customers into thinking they are purchasing a more sophisticated product. The issue extends across various sectors, including system management technologies, databases, middleware, security, and other offerings.

The consequences of AI washing are detrimental to the reputation of the AI industry, fostering false expectations and misconceptions about AI’s actual capabilities.

It also poses challenges for customers trying to discern genuinely innovative AI products amid a sea of misleading claims.

Distinguishing AI washing from cloud washing can be challenging, as customers often rely on salespeople’s assurances regarding the technology’s authenticity. While some technologies may technically be AI-powered, the absence of true, practical applications renders such claims misleading.

Many products claiming AI capabilities often fall short in delivering tangible advantages from their AI-driven systems. Honest product managers admit that AI use is anecdotal and not core to the product’s functionality.