Working Together: the FCA and ICO help firms to use AI responsibly

In a recent news blog, Nikhil Rathi, FCA Chief Executive, and John Edwards, UK Information Commissioner (ICO) have stated that the FCA and ICO will be joining forces and working together to help firms use AI responsibly, while protecting consumers and fostering innovation.

This is an important step as data-driven technologies are transforming financial services, from AI to digital ID, and how regulators, firms and individuals harness these technologies is key to delivering the Government’s mission on growth. By working together, the FCA and ICO are looking to support firms navigating data protection and financial regulation in a way that helps them innovate confidently.

Regulation as a bridge, not a barrier

When done right, regulation isn’t a brake on innovation; it’s a bridge, connecting creativity with public trust. Regulation should be an enabler providing the certainty that firms need to invest, experiment, and grow responsibly.

By working together, the FCA and ICO want to make it easier for firms to navigate UK financial and data protection regulations to enable creativity rather than stifle it.

Listening to the sector

Regulators are looking to be pro-active rather than reactive and to listen and be aware of the challenges firms face. The FCA’s latest joint AI survey with the Bank of England showed 85% of the 118 financial services firms surveyed were currently using or planning to use AI. 33% of firms cited data protection as a constraint on AI adoption and 20% cited FCA regulations.

The FCA hosted a roundtable on 9 May 2025 with industry leaders to better understand the challenges firms face when deploying AI, and to explore how responsible innovation and personal information use can be supported.

Supporting putting regulatory principles into practice

While firms understand the broad rules, many – especially smaller ones – want clearer examples of ‘what good looks like’ in practice and more opportunities for engagement to build confidence in trying new technologies. The FCA will host a roundtable with smaller firms later this year to better understand challenges around AI adoption.

The ICO has already published extensive guidance on AI and, to support good practice into the future, the FCA will be developing a statutory code of practice for organisations developing or deploying AI and automated decision-making. The intention is to enable innovation and growth, while safeguarding privacy.

To further this aim, the Digital Regulation Cooperation Forum (DRCF) workplan also commits regulators to develop their collective understanding of how one another’s regulatory regimes might apply to AI – including agentic AI systems – and work to identify and resolve any points of conflict. The intention is to have a coherent and consistent approach to AI between the different regulators.

Liability and the supply chain

Firms are naturally concerned about who holds responsibility when AI tools are developed by third parties, particularly when these tools make automated decisions that impact the firm’s customers, especially when things go wrong. This can cause a lot of ‘finger pointing’ and firm’s can be unsure about where responsibilities lie. As a result, this can lead to reluctance on taking action. This can also raise questions about how responsibilities are recorded under the  Senior Managers and Certification Regime.

As part of the ICO’s consultation series on generative AI, the ICO published detailed analysis on allocating controllership across the generative AI supply chain. The FCA has also provided information on the responsibility of firms when seeking to adopt generative AI. These consultations are providing clear guidance on ownership and responsibility for firms.

Awareness of support

Some firms are simply not aware of the tools and services already available to them such as the Digital Sandbox, Supercharged Sandbox, and AI Live Testing, which are all within the FCA's Innovation Hub. These tools and services are not limited to the FCA; the ICO also offers the Innovation Advice Service, Regulatory Sandbox and Innovation Hub under its Innovation Services.

Both regulators are working together and cooperating to provide guidance, support and practical help to firms and ensure there is regulatory clarity for financial services firms.

Looking ahead

As far as the regulators and industry are concerned, regulation is not the main blocker to innovation, uncertainty and lack of familiarity are. The FCA and ICO want to reduce that uncertainty by being clearer, more joined-up and more visible with the support offered.

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