Cloud Providers to Report Foreign Clients for Suspicious AI Activity

Biden’s proposed “know your customer” regulation forces cloud service providers to report their foreign clients if suspicious AI-related activity is detected.

• “Know your customer” regulation requires verification of foreign users’ identities and sets minimum standards for compliance.
• The proposed regulation is open for public comments until April 29, reflecting a heightened focus on national security in the tech sector.

The Biden administration is set to release a new proposal requiring cloud service providers to report their foreign clients with suspicious AI-related activities.

Fearing threats to national security posed by foreign entities, especially the military, specifically China, the Biden administration proposed to mandate cloud service providers, private and otherwise, to disclose information on all their foreign clients working on AI.

The list of cloud service providers affected by this draft rule includes the likes of Amazon, Microsoft, and Google. It demands that these companies actively investigate and report any suspicious AI-related activities. The proposed “know your customer” regulation would require U.S. cloud companies to verify the identity of foreign users, setting minimum standards for identification and annual compliance certification. The public has until April 29 to provide comments on the proposed rule before its finalization.

Commerce Secretary Gina Raimondo explains, “We want to make sure we shut down every avenue that the Chinese could have to get access to our models or to train their own models.”

As you may already know, China and the U.S. have been at each other’s throats for years now over technological advancements. The U.S. keeps on imposing sanctions and restrictions despite China’s warning of repercussions. And this is no different. If accepted and implemented, this draft rule would make it so China may have trouble accessing crucial data centers and servers necessary for training and hosting AI.

It has long been established that China and Russia are the U.S.’s boogeymen. They will go to great lengths to ensure that they remain ahead of the trend while keeping those two’s noses out of their business.

However, in doing so, they run the risk of alienating their allies. While the spirit of the regulation targets China, its letter targets all foreign entities. And the rule of thumb here is that unless it’s their own, companies don’t like having governments in their business, especially if they are doing business with the private sector.

 Now you’ll say, “If they are legitimate, they will not be flagged.” Fair point. And the answer to that can only be known once they release the regulation. The answer itself highly depends on what exactly suspicious behavior is. And having to walk that line, specifically with the American justice system, is extremely unattractive to foreign entities.

So, by trying to tame “the devil,” the U.S. could be ruining its companies’ chances at international collaboration.

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