PIMFA
What is Artificial Intelligence?
A recent Financial Conduct Authority (FCA) discussion paper, DP22/4: Artificial Intelligence, offered the following definition of Artificial Intelligence (AI):
‘It is generally accepted that AI is the simulation of human intelligence by machines, including the use of computer systems, which have the ability to perform tasks that demonstrate learning, decision-making, problem solving, and other tasks which previously required human intelligence. Machine learning is a sub-branch of AI.
AI, a branch of computer science, is complex and evolving in terms of its precise definition. It is broadly seen as part of a spectrum of computational and mathematical methodologies that include innovative data analytics and data modelling techniques.’
- WHAT DO FIRMS NEED TO CONSIDER?
Many PIMFA members are already using AI systems and tools in their everyday operations, and it is likely that the adoption of AI in financial services will increase rapidly over the next few years.
PIMFA firms already use AI tools for several purposes. For example, they analyse large volumes of data quickly, easily, and accurately, which enables their employees to spend more time working with and for their clients.
There are concerns that as AI becomes more advanced, it could introduce new risks, for example:
system develops biases in its decision making
leading firms to make bad decisions
rESULTING IN Poor outcomes for their clients
This is why it is essential that firms deploying AI systems have a suitably robust control framework around their AI components to keep a careful check on what they are doing.
As with any innovation, AI has the potential to make fundamental and far ranging improvements in how firms can serve their clients. However, we must ensure it is continually monitored and checked regularly to manage the risk and maximise the benefit.
- What are regulators doing?
A number of government departments are asking regulators such as the Financial Conduct Authority (FCA), Bank of England (BoE), Information Commissioners Office (ICO) and Competition and Markets Authority (CMA) to publish an update on their strategic approach to AI and the steps they are taking according to the White Paper. The Secretary of State is asking for this update by 30 April 2024.
On 13 March 2024, the EU Parliament approved the EU Artificial Intelligence Act. The EU AI Act sets out a comprehensive legal framework governing AI, establishing EU-wide rules on data quality, transparency, human oversight and accountability. It features some challenging requirements, has a broad extraterritorial effect and potentially huge fines for non-compliance.
Read this article from PIMFA journal #33 by Edward Russell at Solve about how talent and controls aid successful AI adoption.
Read this article from the PIMFA Journal #33 by Vicky Pearce at B-Compliant about how to use AI safely and compliantly.
Read this article from PIMFA journal #33 by Richard Doherty and Sumit Johri at Publicis Sapient about the traditional playbook built on manual processes, siloed business and technology functions, and relationship-driven models is no longer sufficient.
Maria Fritzsche
Senior Policy Adviser - Operational Policy, Regulation and Innovation Lead
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latest news
Future of AI in Professional services in Early Careers and beyond 2026
The webinar examines how AI is reshaping professional services, with a particular focus on roles, skills, career pathways and work design. It considers what this means for early careers, including how entry-level roles may evolve and how learning and development approaches may need to adapt. The session also looks at the implications for the broader workforce, including changing expectations around capability, productivity and new approaches to work design and ways of working. Overall, it provides practical insight into the opportunities and challenges AI presents for both talent and organisations in 2026 and beyond.
Speakers:
Rebecca Jordan, Workforce Transformation Principal & Marsh UK Organisation Design Lead
Sabrina Cunnane, Marsh Workforce Transformation Consultant
FCA Supercharged Sandbox: Cohort 2 Underway
The FCA has published further details of its AI Supercharged Sandbox programme, which provides firms with a secure environment to develop, test and refine AI solutions.
The second cohort includes 21 organisations selected from 199 applications and is focused on supporting responsible AI innovation across financial services. Participants have access to GPU enabled infrastructure, synthetic datasets, enterprise AI tools and expert support, with use cases covering areas such as fraud detection, AI governance, compliance automation and improving access to financial services.
The FCA has also partnered with Anthropic, giving participants access to AI tools including Claude to support experimentation and development.
Read more here.
PIMFA WealthTech AI Tech Sprint
The report from the May 2026 PIMFA WealthTech, Morningstar AI Tech Sprint is now available, bringing together insights and findings from the latest Tech Sprint exploring how AI can deliver measurable business impact across wealth management and financial advice.
The latest Tech Sprint, held in May 2026, brought together nine shortlisted fintech firms to showcase AI-powered solutions designed to answer the problem statement to an industry panel including members from the Advisory Group, Morningstar, Finextra and the PIMFA Team. The problem statement asked “AI in wealth and advice – from experimentation to ROI: how can firms turn their application of AI into measurable business impact.
Read the report here,
FCA Publishes Frontier AI and Cyber Resilience Review
The FCA has published a multi-firm review examining how firms are using frontier AI to support cyber resilience and vulnerability management. While the review does not introduce any new rules or regulatory expectations, it highlights that AI is helping firms identify vulnerabilities more quickly, while also exposing weaknesses in governance, remediation processes, and operational resilience arrangements.
A key theme is that firms’ ability to benefit from frontier AI depends less on the technology itself and more on the strength of their existing controls, governance, and operational resilience foundations. The FCA also emphasises that human judgement remains critical, particularly when assessing risks, prioritising remediation activity, and overseeing AI-enabled processes.
For more information: FCA Frontier AI and Cyber Resilience
The Financial Conduct Authority (FCA) Launches Second AI Supercharged Sandbox Cohort
The FCA has launched the second cohort of its AI Supercharged Sandbox programme, selecting 21 organisations from 199 applications, a 51% increase on the first cohort. The programme provides firms with a secure environment to develop, test and refine AI enabled propositions.
The FCA has also announced a collaboration with Anthropic, giving participants access to Claude, Claude Code and Claude Cowork to support experimentation and development throughout the programme. Participants are exploring a range of use cases, including fraud and financial crime detection, AI governance and accountability, compliance automation, and improving access to financial services.
Read more about the FCA’s Supercharged Sandbox here and the FCA’s collaboration with Anthropic here.
Choosing Your AI Partner: A Due Diligence Framework for Wealth Management Leaders
There has been a significant increase in the number of AI providers offering products and services to financial services firms. In response to member feedback, PIMFA has partnered with Solve Partners to develop a practical AI Vendor Due Diligence Guide which provides practical support when evaluating AI vendors.
Read the guide here
HMT: Financial Services AI Adoption Plan
The government’s independent AI champions for financial services have developed an adoption plan setting out recommendations for the government, regulators, and industry to accelerate safe AI adoption and innovation in the sector.
The report identifies barriers to adoption, highlighting five priority areas for action: regulatory clarity, AI-powered financial advice and regulatory perimeter, AI sovereignty and resilience, skills and talent, and agentic payments.
The report’s ten recommendations include measures to improve regulatory certainty, the regulatory perimeter, strengthen AI assurance and skills, enhance coordination mechanisms and establishing a cross-sector AI Risk and Resilience Taskforce.
Read more here
DSIT: Mapping the AI and Software Security Services Market
The Department for Science, Innovation, and Technology has published research examining the UK AI and software security markets.
The report explores the services and tools provided by security vendors, their awareness of the Software Security Code of Practice, AI Security Code of Practice, and the emerging global AI security standard.
The findings suggest most providers are aware of and using these frameworks to shape their services. Demand is driven by concerns of cyber threats, regulatory compliance, and supply-chain risks. The research also found that providers are increasingly using AI and Machine Learning in application security testing, patch management, and automated incident response or triage.
Read more here