In July, Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA), delivered a speech on themes surrounding the implications of artificial intelligence (AI) for both regulators and the financial services industry at large.
Woolard’s speech explored the implications of AI from three key perspectives: continuity, public value and collaboration. The speech notes that although the industry is largely in the nascent phases of embracing AI technology, we are reaching a critical juncture in which financial services regulators will be required to come up with lasting solutions to the issues which AI may pose for the industry in the near future.
The speech considers how and in what ways firms are responding to the growing use of AI in the sector. In the latest cohort of firms to enter the FCA’s regulatory sandbox, the FCA has seen several propositions relating to digital identity to help businesses verify the identities of their customers. Although it is acknowledged that many larger firms remain cautious (with some disregarding it altogether), there is a recognition that firms who look to deploy AI and machine-learning should ensure they have a solid understanding of the technology as well as the governance around it. This said, there is a view that a balance must be struck; with an awareness of regulatory and consumer risk on the one hand while also not allowing over-caution to become a barrier to innovation on the other.
Woolard makes it clear throughout his speech that consumer benefit and customer consciousness remains at the heart of what the FCA is working toward regarding AI. Questions of transparency as well as making decision-making explainable were repeatedly referenced and there appears a clear indication that this will be the sector focus for the FCA in the coming months and years.
The speech does outline the many benefits AI has presented for the industry – particularly in the fields of financial crime and retail banking – however, it goes on to stress that the key to ensuring the Industry is going in the right direction with regard to AI is maintaining ‘a customer-centric approach’ considering larger questions of morality alongside legality.
Woolard goes on to further stress the need for key players and actors in the industry to come together and provide a more nuanced and cohesive approach to AI, one which pays due regard to the changing economic, demographic and political environments in which we all operate.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, August 2019