ChatGPT, Claude and Gemini could come under the supervision of the UK's financial regulator. As citizens increasingly use generative artificial intelligence for financial activities such as savings and loans, British authorities have launched a regulatory review. The reason is that there are no grounds for compensation when problems arise from AI's financial advice.
According to the Financial Times on Monday, the UK's Financial Conduct Authority (FCA) is considering whether to include the use of generative AI such as ChatGPT, Claude and Gemini for financial advice within its regulatory scope. Sheldon Mills, an FCA executive director, likened regulators' efforts to keep pace with AI use in the financial sector to an "arms race."
Mills said the FCA needs greater powers to respond to AI's rapid growth. He urged that it should examine whether large language models (LLMs) such as ChatGPT, Claude and Gemini should be brought under regulation.
Ahead of the release of an AI financial impact report commissioned by the FCA, Mills stressed that regulators must embrace AI adoption. The aim is to keep up with the speed and scale of change brought by AI technology and to monitor, detect and respond to risks.
According to Mills, the report examined the benefits and risks of expanded AI use. The report noted that "hyper-personalization can match products to demand, but it also enables bias, opaque pricing and personalized manipulation." It recommended that the FCA begin a review within three to six months. The purpose is to examine the risks of firms providing financial services outside the regulatory perimeter and the consumer harm arising from the use of AI models in personal financial management.
Advice Once Reserved for the £10 Million Rich, Now Free via AI — The Catch is 'Zero Compensation'
According to an FCA survey, one in five UK adults was considering using AI models for financial decisions such as savings or loans. These services are not regulated, and there is no way to receive compensation when problems occur. Mills said that "some firms said they feel this is an unregulated economic equivalent service." He also pointed out that when regulated firms make similar recommendations, considerably strict rules apply.
On the other hand, Mills argued that AI could broaden access to VIP financial services. He said that even someone earning £20,000 a year could receive financial advice once available only to those with savings or assets of £10 million, adding, "Why would you turn that down?"
Many financial firms are already piloting AI agents that autonomously carry out financial transactions for businesses and consumers. But the question of who bears responsibility is not clear. The report predicted that AI will amplify the threats of fraud and cyberattacks. Deepfakes, synthetic identities and personalized social engineering techniques are pushing fraud and cyber risks into a new phase, it said. The report recommended that AI technology also be used to defend against such threats.
The report also recommended strengthening the FCA's powers under the critical third-party regulatory framework. This is a system that oversees key technology providers in the financial sector, such as Anthropic, OpenAI, Amazon, Google and Microsoft. However, the UK government has not yet decided which Big Tech firms to designate under the system. Designated firms would bear enhanced disclosure obligations, including annual self-assessments and scenario tests that verify their ability to respond to severe disruptions. The FCA board plans to decide how to respond to the recommendations after discussing Mills' report.
Meanwhile, the FCA has drawn criticism from some political circles over a 12-week contract signed with US technology firm Palantir. The contract tests the use of AI systems in combating financial crime. Some lawmakers have raised concerns that the contract could allow US authorities to access sensitive British financial information.
