What happened
The Financial Conduct Authority (FCA) is adapting its regulatory approach to artificial intelligence, opting against new AI-specific regulations. Instead, the FCA is leveraging existing frameworks, including the Senior Managers Regime and Consumer Duty, to mitigate AI-related risks. Concurrently, the FCA is deploying AI internally for firm segmentation, portfolio monitoring, and identifying risky behaviours, alongside experimenting with large language models to streamline authorisations and supervision processes. The FCA also encourages collaboration with firms for innovation testing.
Why it matters
The absence of new AI-specific regulations increases the operational burden on firms' compliance and risk management teams, requiring them to interpret and apply existing frameworks, such as the Senior Managers Regime and Consumer Duty, to novel AI applications. This approach raises due diligence requirements for senior managers, who now bear heightened accountability for the safe and ethical deployment of AI within their organisations without explicit new regulatory guidance. This creates a visibility gap regarding specific AI-related compliance expectations.
