Nikhil Rathi, the FCA chief, has issued a warning to banks concerning the risks associated with AI and the menace of ‘deep fake’ fraud.
In a keynote speech, Rathi acknowledged the productivity advantages of AI for the financial sector. However, he raised alarms about potential risks such as the implementation of automated trading robots and the detrimental impacts of biased datasets.
Rathi elaborated on AI’s capacity to mimic language, audio and video, thus leading to an increased prevalence of ‘deep fake’ videos. Citing a fraudulent video of renowned personal finance campaigner Martin Lewis, he illustrated the urgency of investing in fraud prevention as AI adoption increases.
Moreover, Rathi called attention to the role of Big Tech firms as gatekeepers of data, expressing concern over the potential data-sharing imbalance between these companies and financial services firms. The implications could potentially disrupt normal financial market functioning, with Rathi pointing to the unique and comprehensive data sets Big Tech firms hold as a source of market domination.
Rathi additionally emphasised collaborative work between the FCA, Bank of England and Prudential Regulatory Authority to set standards for third party providers, especially cloud providers. In 2020, nearly two-thirds of UK firms used a handful of the same cloud service providers, highlighting the need to clearly determine responsibility when issues arise.
FCA chief Nikhil Rathi said, “The use of AI can both benefit markets and can also cause imbalances and risks that affect the integrity, price discovery and transparency and fairness of markets if unleashed unfettered.”
He further stated, “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously,” and added, “We will take a robust line on this – full support for beneficial innovation alongside proportionate protections.”
Rathi also voiced his concern about the entrenched power of Big Tech firms, saying, “What does it mean for competition if Big Tech firms have access to unique and comprehensive data sets such as browsing data, biometrics and social media?”
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