The FCA’s update outlined how it sees its existing regulatory framework mapping across to each of the five cross-sector regulatory principles.
Principles and requirements set out in the FCA’s Principles for Business, as well as in its Handbook and Senior Management Arrangements, Systems and Controls (SYSC) sourcebook, were among those cited as relevant to firms’ use of AI.
Other rules referenced include the consumer duty regime, requirements focused on ensuring operational resilience and fair treatment of vulnerable customers, as well as the Senior Managers and Certification Regime.
In relation to accountability and governance, the FCA said, among other things, that the senior management function of firms subject to the enhanced SMCR regime will be responsible for “any use of AI in relation to an activity, business area, or management function of a firm”.
The regulator added that firms’ reporting requirements in line with the consumer duty could also encompass “consideration of current or future use of AI technologies where it might impact retail consumer outcomes or assist in monitoring and evaluating those outcomes”.
“Firms deploying AI should expect heightened scrutiny around governance, explainability, and accountability – particularly where AI systems materially impact consumer outcomes or decision-making,” said Sébastien Ferrière of Pinsent Masons.