On 12 July 2023, the FCA published a speech, delivered by Nikhil Rathi, Chief Executive, on the FCA’s emerging regulatory approach to Big Tech and Artificial Intelligence (AI), given at Economist Impact in London.

Key points covered in Mr Rathi’s speech include the following:

  • The FCA welcomes the government’s call for the UK to be the ‘global hub’ of AI regulation and plans to open its AI sandbox to firms wanting to test the latest innovations.
  • In addition to its recently published feedback statement on Big Tech financial services and call for input on the role of Big Tech firms as gatekeepers of data, the FCA is also considering the risks that Big Tech may pose to operational resilience in payments, retail services and financial infrastructure and is mindful of the risk that Big Tech could pose in manipulating consumer behavioural biases.
  • Together with the Bank of England and the Prudential Regulation Authority, the FCA will be regulating critical third parties and setting standards for their services, including AI services, to the UK financial sector.
  • As AI is further adopted, investment in fraud prevention and operational and cyber resilience will have to accelerate at the same time, and the FCA will take a robust line on this – full support for beneficial innovation alongside proportionate protections.
  • The FCA’s outcomes and principles-based approach to the regulation, including the Senior Managers Regime and Consumer Duty, should mean firms have scope to innovate while protecting consumers and market integrity. The FCA will only intervene with new rules or guidance where necessary. 
  • There are many opportunities and benefits of AI, including its ability to boost productivity, to help improve financial models and cut crime through use of generative AI and synthetic data, to provide more accurate information to everyday investors and tackle the ‘advice gap’, to hyper-personalise products and services to people, and to tackle fraud and money laundering more quickly and accurately and at scale.
  • The FCA is training its staff to make sure they can maximise the benefits from AI. It has also invested in its tech horizon scanning and synthetic data capabilities, and this summer established its Digital Sandbox. Internally, the FCA has developed its supervision technology and is using AI methods for firm segmentation, the monitoring of portfolios and to identify risky behaviours.
  • The global techsprint on the identification of Greenwashing will be hosted in the FCA’s Digital Sandbox, and it will be extending this global techsprint approach to include AI risks and innovation opportunities.