FCA warns financial services firms over AI fraud amid regulation discussions

The head of the Financial Conduct Authority has said that artificial intelligence could disrupt the financial services sector in “ways and at a scale not seen before”, warning that the regulator would be forced to take action against AI-based fraud.

Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), said that there are risks of “cyber fraud, cyber-attacks and identity fraud increasing in scale and sophistication and effectiveness” as artificial intelligence (AI) becomes more widespread, in a speech delivered to executives in London yesterday.

The UK prime minister, Rishi Sunak, is hoping to make the UK a centre for the regulation of AI. The FCA’s work on AI is part of a broader effort to work out how to regulate the big tech sector as it increasingly offers financial products.

In his speech, Nikhil warned that AI technology will increase risks for financial firms in particular. Senior managers at those firms will be “ultimately accountable for the activities of the firm”, including decisions taken by AI, he said.

He added: “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously. We will take a robust line on this, full support for beneficial innovation alongside proportionate protections.”

Nikhil used the example of a recent “deepfake” video of the personal finance campaigner Martin Lewis supposedly selling speculative investments. Lewis said the video was “terrifying” and called for regulators to force big technology companies to take action to stop similar scams.

Derek Mackenzie, CEO of global skills provider Investigo, commented: “With AI set to have a seismic impact on the financial services industry, tackling the digital skills shortfall should be a top priority.

“From compliance to coding, businesses operating in this area are crying out for the latest tech talent to help them explore and implement AI into the workplace, yet many remain woefully understaffed.

“The FCA is right to get ahead of the game on this important issue, but without the right talent pipeline in place, far too many firms will find themselves falling behind in terms of AI capabilities and open to risk due to a lack of in-house regulatory expertise.”

By Matthew Neville – Senior Correspondent, Bdaily

• Add me on LinkedIn and Twitter to keep up to date
• And follow Bdaily on Facebook, Twitter and LinkedIn
• Submit press releases to editor@bdaily.co.uk for consideration.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →