FCA review urges stronger powers to curb AI risks

Ministers have been urged to strengthen the FCA’s powers as AI begins reshaping UK retail financial services. The Mills review found firms are already moving away from human-led interactions toward AI-enabled services for everyday consumers, with potential benefits for access, personalisation and efficiency but heightened risks around fraud, cybersecurity, consumer harm and market concentration.

The review, led by FCA executive director Sheldon Mills, recommends that the regulator adopt its own AI-enabled model to supervise firms and that government expand its authority over “critical third parties”, including AI companies and cloud providers. It also calls for “direct powers” over tech companies to prevent digital monopolies, improve competition and protect consumers.

The FCA found that a fifth of people across the UK, equivalent to 11 million people, are open to using AI to make financial decisions, including savings and borrowing, even though AI models are not scrutinised by financial regulators and consumers will not be compensated if they lose money. Mills also recommended another review within six months into potential harms for consumers using AI to manage personal finances and risks from companies offering unregulated AI-enabled financial services.