The UK government has announced plans to significantly enhance the powers of the City regulator, the Financial Conduct Authority (FCA), to safeguard consumers from emerging threats posed by artificial intelligence (AI) and cyber crime. The move, unveiled on Monday, aims to tackle the growing wave of sophisticated fraud schemes that exploit AI technologies, including deepfakes and automated phishing attacks.
New Measures to Combat AI-Driven Fraud
Under the proposed reforms, the FCA will gain new authority to impose stricter rules on technology companies and financial institutions, requiring them to implement robust safeguards against AI-enabled fraud. This includes mandatory reporting of AI-related security incidents and enhanced data-sharing protocols to track and neutralize threats in real time. According to the Treasury, the measures are designed to close regulatory gaps that have allowed fraudsters to exploit AI tools with increasing impunity.
Economic Secretary to the Treasury, Emma Reynolds, stated: “As AI becomes more advanced, so do the criminals who misuse it. We are giving our regulators the teeth they need to stay ahead of these threats and protect hardworking people from devastating financial losses.” The announcement comes amid a sharp rise in fraud cases linked to AI, with losses estimated at over £1.2 billion in the past year alone, according to UK Finance data.
Consumer Protection at the Forefront
The new powers will also enable the FCA to issue fines of up to 10% of global turnover for companies that fail to prevent AI-powered fraud on their platforms. Additionally, the regulator will have the authority to block products or services that pose a high risk of being used for AI-facilitated scams. Consumer groups have welcomed the move, noting that many victims are elderly or vulnerable individuals who are particularly susceptible to convincing AI-generated impersonations.
“These reforms are a critical step in restoring trust in the financial system,” said Sarah Coles, head of personal finance at Hargreaves Lansdown. “But enforcement will be key—the FCA must be adequately resourced to take on tech giants and sophisticated criminal networks.”
Broader Implications for Tech and Finance
The regulatory overhaul extends beyond fraud prevention, requiring banks and fintech firms to use AI responsibly in their own operations. The government plans to introduce a code of conduct for AI use in financial services, covering areas such as algorithmic bias, transparency, and accountability. This aligns with the UK's broader ambition to become a global leader in AI regulation while fostering innovation.
Industry reactions have been mixed. While some tech firms argue the rules could stifle innovation, others acknowledge the need for clearer guidelines. “We support proportionate regulation that protects consumers without hampering the development of beneficial AI applications,” said a spokesperson for TechUK. The FCA is expected to consult on the detailed rules later this year, with implementation targeted for early 2027.
