In a major speech in London this week, Jessica Rusu, the FCA’s chief data, information and intelligence officer, said AI could be a powerful ally in bringing advice service to more people.

She told the 'City and Financial Global: The AI Regulation Summit 2023' the “responsible adoption” of AI could pave the way for new services.

She said: “It (the responsible adoption of AI) may enable firms to offer better products, improve operational efficiency, increase revenue and drive innovation - we saw some amazing examples of AI put to use in our global GFIN Greenwashing TechSprint, where participants developed real proofs of concept using image recognition and other AI techniques to identify greenwashing in financial services.

“It could also help solve specific challenges, like tackling the advice gap with better, more accurate information delivered to everyday investors.”

Many critics have seen AI as a threat to jobs and the advice sector but Ms Rusu said the FCA was already embracing AI to help spot scams and crooks.

She said: “Our Advanced Analytics unit is using AI and Machine Learning (ML) in providing us additional tools to protect consumers and markets. We have developed web-scraping and social media monitoring tools that are able to detect, review and triage potential scam websites, which we use to proactively monitor.

She added: “And we’re not keeping all the data to ourselves. We are collaborating with industry, and have onboarded around 300 public and synthetic datasets as well as 1000-plus Application Programming Interfaces (APIs) onto our Digital Sandbox to support firm innovation. One example of our use of synthetic data is in our money laundering detection efforts. We take real-world money laundering cases and create synthetic datasets for innovators to use in their AI anti-money laundering (AML) identification tools.”

The data scientist said AI also held the promise of delivering more efficient financial services.

She did not clarify how AI could be used to bridge the advice gap but some experts have suggested AI-driven services could give savers and investors lower cost access to some AI-enhanced financial guidance.

Ms Rusu said the financial services sector was at a “pivotal junction” in its approach to AI but the “beneficial innovations” AI could provide could only materialise through regulation.

Ms Rusu said many experts were giving as much weight to the benefits of AI as to the potential harm to humanity.

She said some commentators have asked whether the financial services sector should steer clear of AI. This was a mistake, she said, as the choice is not “binary” or like “flipping a coin.”

In a positive take on AI she said: “AI has the potential to transform the way we manage our finances, and is becoming pivotal in shaping the global economy. On one side of the coin, we have the shiny prospects of AI-powered innovation, promising greater operational efficiencies and accessibility in financial services, increasing revenues and driving innovation.

“On the other side of the coin, we have a whole host of potential risks. We are at a key moment now - we have options around deciding where to take AI. Or, to use the analogy of the coin; right now the coin is currently spinning in mid-air, and we can influence the outcome. This is a pivotal moment.”

The FCA is currently reviewing responses to its CTP (Critical Third Parties) Discussion Paper and will be consulting on potential rules and guidance for providers of critical services under the Financial and Services Markets Act later this year. 

The FCA is technology-neutral and pro-innovation, she said, but was very clear that it expects all regulated firms to be fully compliant with the existing framework, including the Senior Managers & Certification Regime (SM&CR) and Consumer Duty.