Harry WellsThe FCA has published an update on its approach to AI following the Government’s publication of its pro-innovation strategy on AI in February.
The update covers the FCA’s work so far and explains how it is addressing the Government’s key five principles for AI regulation in the UK, namely:
- Safety, security, robustness
- Appropriate transparency and explainability
- Fairness
- Accountability and governance
- Contestability and redress
The Government’s paper includes also guidance for regulators on how to implement the principles. The FCA’s update addresses its approach on each of these, highlighting initiatives such as its work on operational resilience, critical third parties and the Consumer Duty as well as the now established SMCR and its associated governance requirements.
The FCA supports the Government’s approach and has stated that it supports innovation in AI as a crucial part of driving effective competition. Its focus is on the safe and responsible use of these innovations whilst understanding the advantages and drawbacks of these on consumers and markets. This will include close scrutiny of the frameworks put in place by firms to meet the FCA’s expectations. The FCA’s response to the Government publications explains the importance of an evidence-based view which balances the benefits and the risks, and that this approach will ensure a proportionate and effective approach to the use of AI in financial services.
The FCA notes also that AI should not be considered in isolation because it is important also to consider it in the context of wider technology trends. The FCA’s plans for the next 12 months include:
- Furthering its understanding of AI deployment in UK financial markets.
- Building on existing regulatory frameworks to consider future whether the current regulatory regime needs change.
- Monitoring the potential macro effects that AI can have on financial markets, such as in cyber security and market integrity;
- Collaborating more closely with BoE, PSR and other regulators to build consensus on best practice.
- Engaging internationally to facilitate global alignment and standardisation.
- Piloting AI to encourage safe innovation.
- Investing in the FCA’s own use of AI to proactively monitor markets.
- Collaborating with a wide range of stakeholders to improve understanding and monitor developments in emerging technologies.
Nikhil Rathi also spoke at a Digital Regulation Cooperation Forum Event at which he outlined the FCA’s focus on Big Tech, while the DRCF announced a new AI and Digital Hub, a Government-funded initiative to support innovators working on AI or digital products by giving them informal advice on questions that cross the remit of one or more of the FCA, CME, ICO and OFCOM.