THE HEAD of the Financial Conduct Authority (FCA) has stated that Artificial Intelligence (AI) could disrupt the financial services sector “in ways and at a scale not seen before”, in parallel issuing a warning that the regulator would be forced to take action against AI-based fraud.
In a speech delivered to company executives in central London, Nikhil Rathi (CEO of the FCA) noted that there are risks of “cyber fraud, cyber attacks and identity fraud increasing in scale, sophistication and effectiveness” as AI becomes more widespread.
Prime Minister Rishi Sunak is fervently hoping to make the UK a centre for the regulation of AI, while the FCA’s work on this subject area is part of a much broader effort designed to work out how to regulate the big tech sector as it increasingly offers financial products.
During his delivery, Rathi 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 business”, including decisions taken by AI.
“As AI is further adopted,” observed Rathi, “the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously. We will take a robust line on this. There’s going to be full support for beneficial innovation alongside proportionate protections.”
Rathi cited the example of a recent deepfake video of the personal finance expert Martin Lewis supposedly selling speculative investments. Lewis himself said the video was “terrifying” and has called for regulators to force big technology companies to take action in order to prevent similar scams.
Responding to Rathi’s comments, cyber specialist Suid Adeyanju (CEO of RiverSafe) said: “AI is set to become a regulatory minefield for the FCA, so maintaining a clear line of communication with businesses about the challenges and opportunities ahead is going to be critical in terms of maintaining high standards within the market.”
Adeyanju continued: “The tidal wave of AI-enabled cyber attacks and online scams adds an even greater level of complexity, so it’s vital that financial services firms beef up their cyber credentials and capabilities in order to identify and neutralise these threats before they can establish a foothold.