We are proud to have contributed to a report on the opportunities afforded by artificial intelligence in the financial and professional services industry, which was published by the International Regulatory Steering Group yesterday.
The report contains a very helpful summary of the ways in which financial services firms might use AI in the future and the value they could unlock by doing so. It also addresses the way in which the use of AI in the sector is currently regulated and how the authors think this should be developed in the future.
The main message is that the existing regulatory regime has the flex to enable regulators effectively to regulate the use of AI, but that a principles-based, outcomes-focused and risk-adjusted approach should be taken.
Generally, this is in line with the approach taken by UK regulators to date, which has been sensible and pragmatic, and has involved them engaging with the entities employing AI in an open and understanding way, committing time to understanding what firms are trying to achieve and adapting existing rules/regimes to novel issues as appropriate.
It is positive that the UK regulators have been so engaged. This means that, provided UK firms approach their use of AI in a reasonable way, applying all existing principles consistent with existing practice to their novel AI-powered business methods, they should have a degree of certainty around the regulatory reaction.
I would suggest however that the real test of whether the regulator has fully bought in to the promise of AI will come when something inevitably goes very wrong with a piece of AI in a financial services context . At that point we must hope for a regulator that will be thoughtful and bold enough to withstand calls for any ‘clamp down’ on AI, recognising that AI is merely a means rather than an end in itself (albeit a relatively novel means for now).
The leveraging and application of existing tried-and-tested regulatory frameworks supplemented by updated codes of practice and industry standards will enable AI to thrive