UK Finance has responded to the UK White Paper: “A pro-innovation approach to AI regulation”.

UK Finance is a trade body representing “the collective voice” of over 300 firms in the UK banking & finance sector.

In summary, UK Finance:

• “support the sectoral, risk-based approach, based around regulatory guidance”: noting this as the way to provide flexibility and future-proofing given the peculiarities of each sector and the need for agility of the applicable rules;
• highlight the over-arching need for the rules to avoid duplication, confusion and unnecessary layering and for the regulators to collaborate where issues cut across sectors in order to support this intention;
• support a gap-analysis approach advocating that “regulators can rely on their existing, technology-neutral guidance and rules, with tactical AI-specific supplements when required” rather than providing a “full ‘AI overlay’”;
• “strongly support the development of sandboxes as a tool for delivering business certainty and revealing any areas of tension between regulatory expectations”;
• highlight a potential gap in current regulation where generative AI – such as ChatGPT – has been made publicly available online and poses real risks and challenges;
• place importance on the monitoring of supply chain issues, which will be needed “to ensure that firms deploying AI … are able to access the information they need to do so with confidence while respecting vendors’ intellectual property”; and
• note the importance of international co-operation between governments to promote global alignment wherever it is possible to do so.

The response makes several suggestions, which include:

• the requirement for a clearer general definition for AI, “which is common across regulators in order to avoid distortions, an unlevel playing field or confusion”;
• the need for further consideration of the necessity for a statutory duty on regulators, including around the detail how such a duty “would interact with regulators’ existing statutory mandates and whether there might be any tensions”. UK Finance suggest that a statutory approach may not be necessary at all if the existing regulatory framework is adequately addressing the relevant risks; and
• ensuring consistency and harmonisation between sectors, so as not to stifle innovation with unnecessary complexity.

Related blog posts include our article on the White Paper, our flowchart for navigating the White Paper, our article on The Law Society's response to the White Paper, our response to the government White Paper consultation and our newly-updated AI regulation and policy glossary. We will continue to monitor this interesting and fast developing area.

If you would like to discuss how current or future regulations impact what you do with AI, please contact Martin Cook, Tom Whittaker, Brandon Wong or any other member of our Technology team.

Written by Harvey Spencer, Trainee Solicitor, Funds and Financial Regulation