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The National Audit Office (NAO) plans to assess the Financial Conduct Authority (FCA)’s growing responsibilities, including overwatching cryptocurrencies, risks evolving around artificial intelligence and competitiveness.
According to the NAO, the plan to assess the effectiveness of FCA comes to light due to significant changes in how it is expected to regulate the ever-evolving financial industry.
These changes include governmental orders to ensure the international competitiveness of firms whilst simultaneously conducting crackdowns on the companies’ failure to comply with the laws and regulations. Additionally, on top of the FCA’s incoming “consumer duty,” the financial watchdog will challenge firms on whether they treat and charge clients fairly.
The FCA is also juggling new responsibilities surrounding “technological innovations such as crypto assets and artificial intelligence” that will “provide challenges and opportunities for regulation of financial services,” the NAO said.
The FCA is also now responsible for ensuring that cryptocurrency exchanges adhere to anti-money laundering regulations, and by October this year, the financial watchdog will be tasked to monitor crypto asset-related advertisements. However, these responsibilities could expand depending upon the government’s decision on how to regulate the crypto industry.
Meanwhile, Nikhil Rathi, Chief Executive of FCA, is trying to stay ahead of emerging threats that AI have brought up. In this regard, the former head of the London Stock Exchange gave a speech last week and warned banks, insurers, and investors that artificial intelligence will enhance the effectiveness of fraud detection systems, yet, the senior managers will be responsible for decisions taken by the AI systems.
“As AI is further adopted, the investment in fraud prevention and operational and cyber-resilience will have to accelerate simultaneously,” Rathi said. “We will take a robust line on this – full support for beneficial innovation alongside proportionate protections.”
The FCA was previously audited by NAO in 2014, a year after its creation. FCA was formed out of the ashes of the Financial Services Authority, which was dispersed after the financial industry crisis in 2008.
An FCA spokesperson said: “We welcome the National Audit Office’s review of the FCA and how we adapt to change, as it could help us to ensure we continue to meet our objectives. We have a clear strategy in place about what we want the FCA to be, and we are well underway to achieving that.”