FCA warns specialist finance industry of Al fraud dangers

The head of the Financial Conduct Authority (FCA) has warned that artificial intelligence (AI) could disrupt the financial services sector in ways and at a scale not seen before — claiming the regulator could be forced to take action against AI-based fraud.

CEO at the FCA, Nikhil Rathi, said there are risks of cyber fraud, cyberattacks and identity fraud increasing in scale and sophistication and effectiveness, in a speech delivered to executives in London yesterday (12th June 2023).

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 the CEO warned that AI technology will increase risks for financial firms in particular, with senior managers at those firms being “ultimately accountable” for the activities of the firm, including decisions taken by AI.

Nikhil urged: “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously.”

Suid Adeyanju, CEO at London IT security service, Riversafe, commented: “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 maintain high standards within the market.

“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.”

Chris Downie, CEO at Edinburgh software company, Pasabi, added: “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.

“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.”




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