To support the safe and responsible adoption of artificial intelligence (AI) in financial services, the FCA has shared good practice and areas for improvement examples from industry engagement, supervisory work and its AI Lab initiatives, including AI Live Testing and the Supercharged Sandbox. It has also included a link within the report to its AI Update.
This information is relevant to regulated firms that develop, deploy, procure or use AI in connection with regulated activities, consumer journeys, operations or governance. This includes AI tools developed in-house, supplied by a third party, embedded in another system or used by staff to support decision making.
- The examples in this publication identify common themes and developing practices which are relevant to a variety of AI use cases, such as those using machine learning, generative AI or agentic AI. They are illustrative, non-exhaustive and will evolve as practice develops. They do not create new requirements, prescribe a single model or replace firms’ responsibility for considering what is appropriate and proportionate for their own AI use cases, risks and potential impact.
- There is no one-size-fits-all approach. Firms should respond proportionately to each AI use case, its risks and its potential impact on consumers and markets.
- The report sets out the existing rules and regulatory framework apply to firms’ use of AI:
- Safety, security, robustness: FCA’s Principles for Businesses (PRIN), FCA’s Threshold Conditions (COND), Senior Management Arrangements, Systems and Controls (SYSC), operational resilience, outsourcing and critical third parties regime.
- Fairness, appropriate transparency and explainability: PRIN, Consumer Duty, Guidance for firms on the fair treatment of vulnerable customers, COND, related ICO guidance and Equality Act 2010.
- Accountability and governance: Senior Managers and Certification Regime (SM&CR) among others noted above.
- Contestability and redress: Dispute Resolution: Complaints’ Sourcebook (DISP).
- ·The report contains links to FCA resources in relation to AI and links to external resources. It also contains a useful ‘AI Jargon Buster’ section explaining several AI-related terms.
- The report is quite lengthy, and includes commentary split into three main sections:
- Consumer Duty and consumers in vulnerable circumstances – how firms use AI to achieve good consumer outcomes.
- Governance and accountability – how firms oversee and effectively govern across the AI lifecycle.
- Operational resilience – how firms make sure they deploy AI securely and sustainably.
- Each of the three sections contains a key findings summary, examples of good practice, examples of areas for improvement, case studies (there are a total of 20 case studies throughout the report), and several ‘Smaller firms focus’ notes in the Consumer Duty and Governance and Accountability sections of the report.
- We recommend that all firms should read and understand the report, and the FCA is to publish a joint AI survey with the Bank of England next week which shows that 86% of firms now use AI.