I have to confess that I am in two minds on the rapid spread of AI into regulation, despite assurances from the FCA that it will help cut down on admin and generally be a boon.

To be completely honest, I’m in two minds generally on AI even though we already use it ourselves, to a limited degree, in the production of Financial Planning Today.

So I’m no Luddite when it comes to AI.

However, I got to thinking about all this following a very interesting recent speech by Jessica Rusu, chief data, information and intelligence officer at the FCA, in London recently.

She said the regulator was planning to become a “smarter regulator, enabled by smarter systems.” She said the FCA’s focus on 'smarter systems' would also support growth and innovation.

While she didn’t specifically reference a wholesale shift to AI for the regulator it is clear that it forms part of the FCA’s plans and that the FCA will be encouraging more firms to adopt AI. This week the FCA also launched a live AI testing service to help firms deploy “safe and responsible AI”. The move is part of the FCA’s AI Lab initiative.

The FCA has, of course, already said that it plans to be a much more “data driven” regulator. It’s questionable whether the FCA could do all this without AI but that’s not quite the full picture.

My concern is that AI will be used by the regulator to replace human intervention with AI tools that simply check data and look for anomalies but not much else. This might help spot some rogue transactions but as we know fraudsters are often incredibly cunning and skilful in evading attention.

Only this week we had one case where an adviser was allegedly submitting false returns to the FCA to cover their suspected multi-million pound theft of clients' funds.

We don’t know all the details yet but I wonder in this case if the suspicious transactions were spotted by an AI robot or a human with lots of experience in this area. My money is on the latter.

AI is, of course, not the enemy. Given the vast rise in fraudulent transactions in recent years and the fact the FCA is swamped with data, it does need a hand and AI could be that helping hand, if adopted with care.

Cutting down on admin, such as regulatory returns, could also be a benefit of AI for regulated firms. However, a complex enquiry from an adviser will almost certainly be better handled by a human than an AI robot.

Replacing humans with AI and stopping regulated advisers from seeking personalised, human advice - when they need it - will never be a sensible swap.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin 

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