The Financial Conduct Authority (FCA) is struggling with some of the same challenges in rolling out AI as British financial institutions, the head of department, cross-cutting policy & strategy at the regulator has said.

Speaking on a panel at FTT Festival London, which was focused on the ethical and responsible use of AI in financial services, Alex Smith stressed the challenge the FCA faces in understanding what is happening in their regulatory environment given the huge amount of information they receive from thousands of firms, ranging from small local businesses to major corporations.

“Every single company in this room is facing the challenge of assessing how to effectively use AI in their organisation,” he told the audience. “This is certainly also happening within the regulatory framework of the FCA, and the promising initial results obtained from some proof of concepts suggest that this technology definitely has a future.”

The head of strategy was questioned on how regulators are currently using AI.

He said: “We are actively exploring how to integrate AI into our work, much like other regulators around the world.”

He added that the UK regulator is focusing on integrating AI into processes that require significant human input, such as their authorisation process, to boost efficiency and support improved decision-making.

“The intention is not to replace staff with AI, but to make these processes faster and more effective,” Smith said.

He also pointed out that the financial services watchdog is using AI to help analyse data so that the it can have a clearer picture of what is happening in the market.

“We wonder how best to process and make sense of all this intelligence, and there are hopes for using AI in new ways to help,” Smith added.

He also stressed the importance of accountability when it comes to using AI.

“Even if a company outsources its AI systems, it cannot outsource responsibility for how those systems are used,” he said.

Smith added that this responsibility must be clearly documented within the organisation which has deployed the technology.

He also emphasised that, as a regulatory authority, the FCA shares responsibility for ensuring that AI deployment is done correctly and for working with financial services to achieve this goal. .

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