Sheldon Mills, an executive director at the Financial Conduct Authority (FCA), has called for Britain to consider directly regulating AI models like ChatGPT, Claude, and Gemini, due to their increasing influence on consumer financial decisions. He argues that the existing regulatory framework needs to evolve, especially as financial firms become dependent on a small number of tech providers, which could lead to system-wide risks. A recent FCA review highlighted that over a quarter of UK consumers rely on these AI tools for financial advice, often unaware that the protections for regulated financial services do not extend to these systems. This creates a significant gap in consumer protection, as recourse for poor guidance from a chatbot is unclear compared to a regulated advisor.
Mills recommended that within the next three to six months, the FCA should review and potentially adapt its regulatory perimeter to include these general-purpose AI models. He also floated ideas for future oversight, such as requiring firms to explain AI decision-making, auditing algorithms for fairness, and imposing fines for systems causing consumer harm. The concern about concentration risk is paramount; if many regulated firms rely on the same few model providers, a flaw in one system could cause widespread disruption across the financial sector, a problem similar to those seen with cloud computing.
This intervention from the FCA signals a potential shift in the UK's approach to AI regulation, which has previously favored a pro-innovation, principles-based model without a bespoke AI law. Mills is not advocating for a UK AI Act but suggests that the sector-by-sector regulatory model has a loophole regarding general-purpose systems that the FCA might need to address. The core issue is that these AI models are often opaque, even to the companies deploying them, making direct regulation of the models themselves a significant challenge, especially since the largest model providers are often American companies outside the FCA's direct jurisdiction.
