Tech and fraud prevention firms have reacted along with Financial Conduct Authority chief, Nikhil Rathi who has issued a warning to industry leaders about the rising threat posed by AI and the cyber privacy risks and online fraud.

Artificial intelligence is upending multiple sectors including the financial services in driving digitalisation and transforming identity-based practices. However the downside to leveraging artificial intelligence can be easily identified in the growing risks of “cyber fraud, cyber-attacks and identity-related fraud” which increases in “scale and sophistication and effectiveness”. Chief Executive of the FCA, Nikhil Rathi, made light of the epidemic of privacy attacks in a speech delivered to executives in London yesterday.

Prime Minister Rishi Sunak has sought to position the UK as a firm supporter and instigator of global regulation on AI while campaigners have stressed that the government risks undermining the positive use cases of AI.

Negotiations between member states and the EU Parliament on the limits of the AI Act have shown why a black and white approach should not be adopted by different political camps. The subject of AI becomes too difficult to navigate when, by comparison to the UK government for instance, law enforcement authorities and member states are pushing back on prohibitions in the AI Act. 

The FCA and other agencies are embracing rules to regulate AI within the tech sector that at large is most familiar with using these technologies, offering financial products and identity verification solutions. Rathi suggested financial firms would face the biggest problems from AI technology promoting incidents of identity fraud and theft and that senior managers at those firms would be “ultimately accountable for the activities of the firm”, including decisions taken by AI. 

He said: “As AI is further adopted, the investment in fraud prevention and operational and cyber resilience will have to accelerate simultaneously.”  “We will take a robust line on this – full support for beneficial innovation alongside proportionate protections.”

To combat the rising threats associated with AI, software providers will need to harness the latest fraud detection technologies, to start restoring confidence in the financial services market.