By now, many people are aware of the term “greenwashing” – when brands make exaggerated or misleading sustainability claims that aren’t backed up by certifications or data. Lately, however, there’s a new kind of “washing” to be on the lookout for.

AI washing is when companies exaggerate how much AI or machine learning is used in their products and service, in order to make them seem more advanced or simply to capitalize on the business world’s growing interest in generative artificial intelligence. There’s certainly an incentive to do so: Studies have shown that startups that use the term “AI” attract anywhere from 15% to 50% more funding than those that don’t, for example.

But AI washing has plenty of downsides. Earlier this year, the Securities and Exchange Commission (SEC) settled charges with two investment advisers; they had to pay $400,000 total in civil penalties for making false and misleading statements about their use of AI. The SEC said Delphia Inc. claimed in a press release that it was using machine learning that incorporated client data in its investment process, but that the firm did not actually have the AI capabilities it claimed. Global Predictions Inc. made similar misleading boasts, falsely claiming to be the “first regulated AI financial advisor,” according to the SEC.

“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies,” said Gary Gensler, chairman of the SEC. “Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors.”

Of course, the concept of AI washing goes beyond the investment world. With AI gaining popularity in the promotional products industry and business world at large, it’s wise to keep a critical eye on technology products you’re considering – as well as to be circumspect in marketing claims you make about offerings your own business makes.

Consider these tips for spotting – and avoiding – AI washing.

1. Beware of vague claims. Look for companies that are transparent about the data and algorithms used in their AI models and are clear about both the capabilities and limitations of the technology. If they’re unwilling or unable to explain how their technology works, consider it a red flag.

2. Ask a lot of questions. Sales reps should be able to explain how their company has taken steps to avoid things like bias and AI hallucinations in their products.

3. Assess the real-world impact. Just because software says it’s powered by AI doesn’t necessarily mean it will benefit your operations. Don’t be blinded by bells and whistles. Instead, evaluate whether the claimed AI features will genuinely enhance your efficiency, productivity or other aspects of your business.

4. Request demonstrations. Ask vendors to provide demos or case studies showing the practical application of AI in their offerings. Look for tangible examples of AI-driven processes or outcomes.