FCA speaks on regulatory approach to Big Tech and AI

Nikhil Rathi, Chief Executive at FCA, has delivered a speech at The Economist on FCA’s emerging regulatory approach to Big Tech and AI.  It notes that with the “right guardrails in place”, AI can offer opportunity, and that FCA wants to make reality the Government’s intention to have the UK as the home of global AI safety regulation.

FCA has also published its feedback statement on Big Tech in Financial Services, which announces a future call for further input on the role of Big Tech firms as gatekeepers of data and the implications of the ensuing data-sharing asymmetry. It is also considering the risks that Big Tech may pose to operational resilience in payments, retail services and financial infrastructure, and highlights the risk it might pose in manipulating consumer behavioural biases. Although partnerships can offer opportunities, FCA wants to test further whether the entrenched power of Big Tech could also introduce significant market functioning problems.

Rathi also noted that cyber fraud, cyber attacks and identity fraud practices are becoming more sophisticated and effective. He promised that FCA would take a robust line on investing in fraud prevention and operational and cyber resilience in order to tackle these issues.

On the opportunities posed by AI, he mentioned:

• Using Generative AI and synthetic data to help improve financial models and cut crime;
• Tackling the advice gap with better, more accurate information delivered to everyday investors, not just the wealthiest customers who can afford bespoke advice;
• Hyper-personalising products and services; and
• Tackling fraud and money laundering more quickly, accurately and at scale.

In terms of FCA’s approach, Rathi said it was training its staff to ensure they can maximise the benefits from AI, and that it has invested in tech horizon scanning and synthetic data capabilities. Internally, it is developing supervision technology by using AI methods in firm segmentation, portfolio monitoring and identification of risky behaviours. The global techsprint on the identification of greenwashing in its Digital Sandbox will also be extended to include AI risks and innovation opportunities.