The Chief Executive Officer of the Financial Conduct Authority (FCA), Nikhil Rathi, has raised concerns about the increasing risk of artificial intelligence (AI) in the financial services sector. Speaking to industry leaders, Rathi highlighted the potential for AI to disrupt the industry in unprecedented ways, particularly regarding cyber risk and online fraud. He warned that the FCA would take action against AI-based fraudulent activities. These warnings come with the UK’s aim to lead international efforts in regulating AI, with an upcoming summit on the risks and regulations surrounding AI.
The rising threat of AI
According to Rathi, as AI becomes more widespread, there is a significant risk of cyber fraud, cyber-attacks, and identity fraud escalating in scale, sophistication, and effectiveness. Prime Minister Rishi Sunak’s meeting with CEOs from leading AI companies in May emphasized the UK’s desire to be at the forefront of global AI regulation. However, Rathi cautioned that AI technology will increase risks for financial firms, making senior managers ultimately accountable for decisions made by AI. He stressed the need for accelerated investment in fraud prevention, operational resilience, and cybersecurity measures to keep pace with AI adoption.
The deepfake challenge
Rathi cited the example of a recent deepfake video featuring personal finance campaigner Martin Lewis promoting speculative investments. Lewis described the video as “terrifying” and called for regulatory action to prevent similar scams. In response to the growing concern, several tech platforms have begun clearly labeling content generated by AI tools. Governments worldwide are also working on AI regulatory frameworks. Microsoft, for instance, introduced a detection tool in September 2020 to identify deepfake photos and videos to combat disinformation.
With the increasing prominence of AI, the FCA faces a regulatory minefield. Suid Adeyanju, CEO of cybersecurity specialist RiverSafe, emphasized the importance of maintaining open communication with businesses to address the challenges and opportunities that lie ahead. Adeyanju highlighted the complexity brought by AI-enabled cyber attacks and online scams, urging financial services firms to strengthen their cybersecurity capabilities and neutralize these threats effectively.
Strengthening fraud detection
Chris Downie, CEO of fraud detection platform Pasabi, stressed the need for financial services to enhance their ability to detect AI-driven fraud and scams. Downie commended the FCA’s recognition of the urgency to bolster fraud prevention measures and emphasized the importance of collaboration between the FCA, businesses, and fraud software providers. Such collaboration would enable the adoption of advanced fraud detection technologies and help restore confidence in the financial services market.
The CEO of the FCA, Nikhil Rathi, has highlighted the growing threat posed by AI in the financial services sector. As AI technology advances, the risks of cyber fraud and online scams increase in scale and sophistication. The FCA intends to take a robust stance on AI-based fraudulent activities while promoting beneficial innovation and proportionate protections. The challenge lies in maintaining effective communication with businesses and staying ahead of AI-driven threats through accelerated investment in cybersecurity and fraud prevention measures. By collaborating with industry experts, regulatory bodies can harness the latest technologies to detect and neutralize AI-driven fraud, restoring confidence in the financial services market.
