UK's FCA Warns AI Is Moving Faster Than the Law Can Keep Up

--- headline: "UK's FCA Warns AI Is Moving Faster Than the Law Can Keep Up" slug: fca-ai-faster-than-law-warning category: policy story_number: 15 edition_date: 2026-06-24 ---

The man who polices Britain's financial markets used a London stage on Wednesday to deliver a blunt admission: the rulebook he enforces cannot move at the speed of the technology now reshaping the industry it governs. Speaking at techUK's "Agents of Change" conference on generative and agentic AI in financial services, Financial Conduct Authority chief executive Nikhil Rathi argued that artificial intelligence is outpacing the legal scaffolding built to contain it — and that the regulator must change what it is, not just what it requires.

"Technology is moving much faster than many regulatory paradigms," Rathi said. "Legislation will never keep up."

It was a striking statement from the head of a statutory regulator, and Rathi did not soften it. The pace of change brought by AI, he said, is "challenging many of the assumptions on which our markets and regulation were built." The question facing the FCA, he argued, "isn't simply how we regulate for AI" but "how do we preserve trust, competition, and resilience when technology is moving markets dramatically faster than the frameworks governing them?"

A regulator rethinking itself

Rathi's pitch was that the FCA is responding by re-engineering its own operating model rather than racing to write new rules. He framed AI adoption as already near-universal — citing studies suggesting more than 80% of financial services firms are using it — and said the live issue is now scale, not pilots.

Two developments anchored his vision of where markets are heading. The first is agentic AI: systems that, in his words, "don't just support financial decisions, but coordinate and transact," from personalised investment strategies in retail to liquidity management and trading workflows in wholesale markets. The second is tokenisation, which he tied directly to a UK first announced days earlier — FCA approval for Baillie Gifford, alongside Bank of New York Mellon, to launch the country's first natively tokenised authorised fund, with "the entire transaction journey, end-to-end, on chain."

But Rathi was candid about the limits of conventional rulemaking in that world. "In some areas, we will still need detailed rules," he said. "But in others, traditional rule-making simply won't work anymore." A growing part of the FCA's job, he argued, will be "stewardship, as well as supervision" — and, pointedly, "even acting before legislation catches up." He invoked Buy Now Pay Later as proof of concept: it took roughly six years to fall within the FCA's regulatory perimeter, "but we did not wait six years to intervene."

The regulator is also turning AI on itself. Rathi said the FCA is exploring agentic AI as a "first responder" to monitor wholesale markets, harnessing "a billion rows of data per day" alongside supervisory judgement to tackle market abuse faster.

Innovation, fraud and the consumer trade-off

For all the talk of speed, Rathi repeatedly returned to the protective half of the FCA's mandate. Investors, he warned, "will be wary to delegate important decisions to systems they don't understand," and "accountability for regulated activities and outcomes must remain clear." Agentic finance, in his telling, only works "with the right human oversight."

The resilience risks were quantified starkly. Rathi cited UK Finance's Annual Fraud Report figure that the UK lost almost £1.3 billion to payment fraud last year, with two-thirds of authorised fraud cases originating on social media and messaging platforms. He noted that 98% of operational incidents reported to the FCA last year related to technology and cyber issues, and warned that frontier AI could "magnify risks even further" — helping firms find vulnerabilities, but helping attackers exploit them just as fast.

That tension — pro-innovation acceleration against consumer protection — is the defining strain of the FCA's current posture. The regulator has leaned hard into enablement through its AI Lab, the Supercharged Sandbox (where firms test against real-world data and compute with partners including Nvidia, and soon Google), AI Live Testing, and an AI Consortium run with the Bank of England. Rathi's framing was deliberate: "Not to stand in the way of innovation, but to support the UK to seize the opportunity." He even reframed competition policy around AI, saying the FCA expects to use system-wide powers "more frequently — not as exceptional interventions, but as a regular part of our toolkit," and insisting its role "is not to protect incumbents."

How the UK's bet compares

Rathi's speech is best read as a defence of a distinctly British wager. Where the EU has codified AI obligations into binding law, the UK is staking its approach on agility. Under the EU AI Act — which becomes substantially applicable on 2 August 2026 — credit scoring and creditworthiness systems are classified as high-risk under Annex III, triggering conformity assessments and fundamental-rights impact assessments. The FCA, by contrast, expects firms to demonstrate AI compliance within existing frameworks: the Consumer Duty and the Senior Managers and Certification Regime, which pins individual accountability on named executives rather than the model.

The United States sits closer to the UK in philosophy but is more fragmented, with sectoral regulators — the SEC on algorithmic trading, the CFPB on AI-assisted credit decisions — addressing risks piecemeal against a backdrop of innovation-focused federal deregulation and patchwork state laws. Rathi's "legislation will never keep up" is, in effect, the thesis statement of the UK's outcomes-based, technology-neutral model: rather than legislate the technology, regulate the harms and the humans responsible for them.

The obvious critique is that "agility" can shade into a regulatory gap, leaving consumers exposed while the FCA's stewardship machinery catches up. Rathi's counter is that prescriptive rules age badly against exponentially improving models — and that the alternative is a rulebook permanently behind the market.

What to watch

Two near-term signals will test whether the rhetoric becomes policy. Rathi flagged the Mills Review, due within weeks, setting out how AI could reshape retail financial services, followed later in the year by FCA guidance on "good and poor AI practice" — the document most likely to reveal where the regulator's pro-innovation tolerance actually ends. Also worth tracking: how aggressively the FCA deploys its system-wide competition powers as AI lowers barriers to entry, and whether its "act before legislation catches up" instinct survives its first contact with a genuine AI-driven consumer harm.

Sources: [FCA — Re-thinking regulation for the age of AI](https://www.fca.org.uk/news/speeches/re-thinking-regulation-age-ai); [PYMNTS](https://www.pymnts.com/news/artificial-intelligence/2026/fca-boss-warns-ai-is-moving-faster-than-the-law/); [MLex](https://www.mlex.com/mlex/artificial-intelligence/articles/2493188/ai-s-rapid-evolution-forces-regulatory-rethink-fca-chief-rathi-says); [A&O Shearman — AI under financial regulations in the U.S., EU and U.K.](https://www.aoshearman.com/en/insights/ao-shearman-on-tech/zooming-in-5-ai-under-financial-regulations-in-the-us-eu-and-uk-a-comparative-assessment-part-1)