UK FCA warns regulators are struggling to keep up with AI in finance

In short: The UK financial regulator says it is in a race to keep up as AI tools are increasingly used for personal finance advice and actions.

What's going on

Sheldon Mills, an executive director at the UK Financial Conduct Authority (FCA), told the Financial Times that regulators are in an “arms race” to keep up with artificial intelligence in financial services. He said the FCA may need stronger powers because AI is spreading fast across banking, investing, and money management.

A key concern is that many people now use popular AI chatbots like ChatGPT, Claude, and Gemini to help decide what to do with their money. These tools are “large language models,” meaning they predict and write answers based on patterns in lots of text (like a very advanced autocomplete). Mills said these AI services may sit outside current financial rules, even when they behave a lot like regulated financial guidance.

Research commissioned by Mills found that about one in five UK adults are open to using AI to make financial decisions, like savings or borrowing. If the advice is wrong, there may be no formal complaints process and no compensation, unlike with regulated financial advisers.

Mills’ upcoming FCA-commissioned report also flags risks like biased outcomes, unclear pricing, and “personalized manipulation,” meaning advice that nudges people in ways that benefit a company more than the customer. It also warns AI could increase fraud and cyber attacks through deepfakes and fake identities (think forged documents, but made quickly and at scale).

What to watch

The report recommends the FCA review these risks in the next three to six months, and consider whether some AI-based money guidance should fall under FCA rules. It also suggests closer oversight of key tech providers that supply tools to finance firms, and stresses that a human should still be accountable when AI systems take actions.

Source: Arstechnica