Tag: National Defense Authorization Act

Congress Passes Defense Bill with AI Provisions — AI: The Washington Report

  • On December 18, Congress passed the FY 2025 National Defense Authorization Act (NDAA), which includes a number of AI provisions. The NDAA is expected to be signed into law by President Biden.
  • The NDAA includes the first – and likely the only – AI provisions passed by the 118th Congress.
  • Although the Bipartisan Senate AI Working Group had called for comprehensive AI legislation earlier this year, the AI provisions in the NDAA do not substantially regulate the use of AI. Instead, they direct defense agencies to launch pilot programs and initiatives to support the adoption of AI by the government for defense purposes.

On Wednesday, the US Congress voted to pass with bipartisan support the 2025 National Defense Authorization Act (NDAA), which includes a number of AI provisions. The bill will now be sent to President Biden’s desk, where he is expected to sign it into law.In recent months, Senator Schumer (D-NY) and other Senators who had been determined to act on AI, as we covered, had increasingly touted the NDAA as the most likely pathway through which to pass AI legislation this Congress. And while the NDAA does include AI provisions, it does not include generally applicable provisions, for example, the comprehensive AI legislation that the Bipartisan Senate AI Working Group and other members called for this year, as we covered. Instead, the AI provisions in the NDAA direct defense agencies to launch pilot programs and initiatives to support the adoption of AI by the government for strategic and operational purposes.

AI in the NDAA

The NDAA includes a number of AI provisions that direct defense agencies to adopt the use of AI for strategic and operations purposes. The NDAA would:

  • Create a Chief Digital Engineering Recruitment and Management Officer: The NDAA appoints a Chief Digital Engineering Recruitment and Management Officer at the Department of Defense (DOD) who is charged with “clarifying the roles and responsibilities of the artificial intelligence workforce” at DOD.
  • Promote AI Education: The Act tasks the Chief Digital and AI Officer at DOD, with 180 days after the NDAA is enacted, to develop educational course on AI for members of DOD.
  • Identify AI National Security Risks: The NDAA modifies the existing responsibilities of the Chief Digital and AI Officer Governing Council to direct the council to identify AI models that “could pose a national security risk if accessed by an adversary of the United States” and “develop strategies to prevent unauthorized access” of such technologies. The NDAA also directs the Council to “make recommendations and relevant federal agencies for legislative action” on AI.
  • Harness AI for Auditing: The Act directs the secretaries of the different branches of the armed forces to “encourage” the use of AI for “facilitating audits of the financial statements of the Department of Defense.”
  • Improve the Human Usability of AI: The Under Secretary of Defense for Research and Engineering shall launch an initiative to “improve the human usability of artificial intelligence systems and information derived from such systems through the application of cognitive ergonomics techniques.”
  • Consider AI in Budgeting: Within 180 days of the NDAA’s enactment, the Chief Digital and Artificial Intelligence Officer at DOD shall make sure that budgets for AI “includes estimates for the types of data required to train, maintain, improve the artificial intelligence components or subcomponents contained within such programs.”

The Secretary of Defense’s AI Programs

The NDAA specifically directs the Secretary of Defense to launch a number of pilot programs and initiatives to accelerate the adoption and development of AI by DOD.

  • Pilot Program for Biotechnology and AI: The Secretary ofDefense shall launch a pilot program to “develop near-term use cases and demonstrations of artificial intelligence for national security-related biotechnology applications” with support for public-private partnerships within one year after the NDAA is enacted.
  • Pilot Program on AI Workflow Optimization: Within 60 days after the NDAA is enacted, the Secretary of Defense shall launch a pilot program to study and determine the feasibility of using AI to optimize the workflow and operations for DOD manufacturing facilities and contract administration services.
  • Multilateral AI Working Group: Within 90 days after the NDAA is passed, the Secretary of Defense shall form a working group “to develop and coordinate artificial intelligence initiatives among the allies and partners of the United States.”
  • Expanded DOD AI Capabilities: The Secretary of Defense shall establish a program “to meet the testing and processing requirements for next generation advanced artificial intelligence capabilities” at DOD installations. The Secretary is directed to expand the infrastructure of DOD for the “development and deployment of military applications of high-performing computing and artificial intelligence capabilities,” as well as develop “advanced artificial intelligence systems that have general-purpose military applications.”

Sense of Congress

The NDAA acknowledges both the potential strategic benefits that AI provides, as well as the risks its poses. The use of AI presents numerous advantages, from strengthening “the security of critical strategic communications” to improving “the efficiency of planning process to reduce the risk of collateral damage.” However, it is the sense of Congress that “particular care must be taken to ensure that the incorporation of artificial intelligence and machine learning tools does not increase the risk that our Nation’s most critical strategic assets can be compromised.”

The new Congress will have to start over from scratch, i.e., bills will have to be introduced or reintroduced, activity in the current Congress will be of no effect, and control of the Senate will pass to the Republicans. In this divided Congress, the efforts to pass AI regulations, largely led by Democrats, had always faced an uphill battle, complicated by partisan disagreements about the urgency with which to regulate AI and the need to better understand AI. With Republicans taking control of both chambers in January, Republicans in the next Congress are unlikely to push for the substantial AI regulation that we’ve seen proposed in the past year, instead favoring deregulation and investments in AI R&D. But just as AI continues to evolve, it remains to be seen how the next Congress will chart the future course of AI legislative activity.

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Congress Eases Criminal Offense Restrictions for Employment With Financial Institutions

Included in the defense spending bill signed by President Biden in December 2022 is a section with key provisions for financial institutions that will ease restrictions on hiring candidates with criminal records. Section 5705 in the National Defense Authorization Act (NDAA) for Fiscal Year 2023, titled “Fair Hiring in Banking,” further narrows convictions that would constitute a bar to employment under Section 19 of the Federal Deposit Insurance Act (FDIA) absent a written waiver by the Federal Deposit Insurance Corporation (FDIC). A representative for the FDIC confirmed that the changes are effective now and will be implemented by the FDIC in 2023.

Background

Section 19 generally prohibits any person who has been convicted of a crime of “dishonesty or a breach of trust or money laundering or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense” from working in banking without first obtaining written consent from the FDIC.

Section 19 requires financial institutions to conduct criminal background checks on job candidates, regardless of whether state or local laws limit consideration of criminal histories in hiring. In July 2020, the FDIC issued a final rule that loosened the prohibitions in Section 19 by, among other things, expanding what are considered “de minimis” offenses and expanding the definition of “expungement” to include an order to seal a criminal record or a record relating to a pretrial diversion program.

Older Offenses

The Fair Hiring in Banking provisions go even further, providing that a waiver is not needed if it has been seven years or more since the offense occurred or if the individual was incarcerated with respect to the offense and it has been five years or more since the individual was released from incarceration. The need for a waiver also does not apply to conduct that an individual committed before the age of 21 and if it has been at least thirty months since the sentencing.

De Minimis Offenses

The provisions further permit the FDIC to exempt other “de minimis offenses” that they may determine by rule. Those rules must include a requirement that the offense “was punishable by a term of three years or less.” Applicable de minimis offenses may include offenses for writing bad checks so long as the aggregate value of all the bad checks is $2,000 or less. The FDIC may further designate other “lesser offenses” to be exempt if one year or more has passed since conviction, “including the use of a fake ID, shoplifting, trespass, fare evasion, driving with an expired license or tag, and such other low-risk offenses.”

Consent Applications

According to the provision, when reviewing an application to allow an individual with an applicable criminal conviction to work for a bank, the FDIC must make an “an individualized assessment.” This assessment must take “into account evidence of rehabilitation, the applicant’s age at the time of the conviction or program entry, the time that has elapsed since conviction or program entry, and the relationship of individual’s offense to the responsibilities of the applicable position.” They must further consider the individual’s employment history, letters of recommendation, and the completion of any substance abuse or job preparation programs.

Key Takeaways

The Fair Hiring in Banking provisions clear some barriers for financial institutions to hire individuals who may have committed criminal offenses in the past but have since been rehabilitated, providing needed flexibility in hiring and recruitment. Further, the provisions go beyond the 2020 FDIC rule changes by amending Section 19 of the FDIA to create exceptions to hire individuals convicted of certain criminal offenses without burdensome consent review by the FDIC.

While the federal laws preempt conflicting state and local laws, the Fair Hiring in Banking provisions are in line with the growing number of jurisdictions across the country that have prohibited or limited consideration of job candidates’ criminal histories in the hiring process. Those measures, such as so-called ban-the-box laws, have been imposed in part to promote rehabilitation and concerns that considering criminal histories in hiring disproportionately affects individuals in protected classes.

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