The Head of the Financial Conduct Authority has said that artificial intelligence could disrupt the financial services sector in “ways and at a scale not seen before”, warning that the regulator would be forced to take action against AI-based fraud.
Nikhil Rathi, the Chief Executive of the Financial Conduct Authority (FCA), said that there are risks of 'cyber fraud, cyber-attacks, and identity fraud increasing in scale and sophistication and effectiveness' as artificial intelligence (AI) becomes more widespread, in a speech delivered to executives in London, United Kingdom (UK).
AI regulation
The UK Prime Minister, Rishi Sunak, is hoping to make the UK a centre for the regulation of AI. The FCA’s work on AI is part of a broader effort to work out how to regulate the big tech sector as it increasingly offers financial products.
In his speech, Nikhil 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 firm', including decisions taken by AI.
Investment in fraud prevention
We will take a robust line on this, with full support for beneficial innovation alongside proportionate protections"
Nikhil Rathi stated, “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously. We will take a robust line on this, full support for beneficial innovation alongside proportionate protections.”
Action on video scams
Nikhil Rathi will use the example of a recent 'deepfake' video of the personal finance campaigner - Martin Lewis supposedly selling speculative investments.
Martin Lewis said the video was 'terrifying' and called for regulators to force big technology companies to take action to stop similar scams.
AI-enabled cyber attacks
AI is set to become a regulatory minefield for the FCA, so maintaining a clear line of communication"
Responding to the announcement, 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 critical to maintaining high standards within the market."
He adds, “The tidal wave of AI-enabled cyber attacks and online scams adds a greater level of complexity, so it’s vital that financial services firms beef up their cyber credentials and capabilities to identify and neutralise these threats before they can get a foothold.”
Fraud detection technologies
Chris Downie, CEO of fraud detection platform - Pasabi said, “It’s encouraging that the FCA is recognising the need for firms to rapidly ramp up fraud prevention measures to meet the challenge of AI-driven scams and cyber fraud. Cybercriminals and fraudsters are wasting no time in hijacking the technology to create realistic online scams at scale and right now they are winning."
“To reverse this trend, a collaborative approach between the FCA, businesses, and fraud software providers will be key to harnessing the latest fraud detection technologies, to start restoring confidence in the financial services market,” added Downie.
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