---
title: "AI in financial services: good practice and areas for improvement"
description: Regulation, compliance, digital, RegTech, practice management, client-centric, risk, Governance, Risk, ConsumerDuty, Supervision, FCA, governance, AI, AIlab,
image: https://resources.model-office.co.uk/hubfs/IMG_8649-1.jpeg
---

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# The Model Office Blog

## [AI in financial services: good practice and areas for improvement](https://resources.model-office.co.uk/ai-in-financial-services-good-practice-and-areas-for-improvement)

 \[fa icon="calendar"\] Oct 19, 2026, 3:28:57 PM / by [Chris Davies](https://resources.model-office.co.uk/author/chris-davies)

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MODEL OFFICE | REGULATORY INTELLIGENCE | 19 OCTOBER 2026

The FCA's [latest publication, AI in financial services: good practice and areas for improvement](https://www.fca.org.uk/publications/good-poor-practice/ai-financial-services), provides important direction for firms deploying artificial intelligence across financial services.

The central message is clear: AI adoption must be supported by effective governance, risk management, ethical controls and evidence of good customer outcomes. Crucially, accountability remains with the regulated firm, not its technology provider.

## From AI adoption to accountable oversight

The FCA identifies good and poor practices across three important areas: Consumer Duty, governance and accountability, and operational resilience.

Its findings highlight the importance of:

- Governance and accountability: Clear senior management ownership, defined risk appetite and documented AI approval processes.
- Ethical AI deployment: Testing for bias, fairness, explainability and appropriate treatment of vulnerable customers.
- Continuous risk monitoring: Identifying inaccurate outputs, model drift, emerging risks and potential customer harm.
- Human oversight: Ensuring qualified individuals can challenge, override and escalate AI-generated decisions.
- Third-party assurance: Effective supplier due diligence, independent challenge and ongoing oversight of externally provided AI systems.

These expectations build on existing FCA regulatory requirements rather than introducing a separate AI rulebook.

## Who is marking the AI compliance homework?

One particularly important issue is the increasing reliance on third-party AI vendors to automate compliance assessments, client file reviews and regulatory reporting.

While these technologies offer considerable efficiencies, firms must question whether vendor-generated compliance scores and assurance reports provide sufficient independent evidence.

If an AI vendor develops the compliance assessment, defines the scoring methodology and validates its own outputs, who is independently checking the quality and accuracy of those results?

The FCA makes clear that firms remain responsible for AI systems they procure and deploy, including their outputs and outcomes.

Technology providers can support regulatory compliance, but they cannot assume the regulated firm's accountability.

## Model Office: Regulatory intelligence and defensible AI oversight

At Model Office, our regulatory intelligence approach is designed to help firms maintain ownership of their governance, risk and compliance responsibilities.

Our AI-enabled supervision, compliance diagnostics, automated document audits and data analytics provide a structured framework for:

- Regulatory mapping: Assessing activities against FCA requirements, Consumer Duty obligations and established compliance controls.
- Evidence-based assurance: Identifying exceptions, control weaknesses and areas requiring independent review.
- Data-driven oversight: Providing risk scores, trend analysis, dashboards and management information across firms, advisers and compliance activities.
- Outcome monitoring: Connecting governance controls and compliance findings with evidence of customer outcomes.
- Auditability and accountability: Recording findings, ownership, actions and remediation to support management and board scrutiny.

Importantly, AI-generated assessments should themselves remain subject to appropriate validation and human challenge.

## Building trust through evidence

As AI progresses from assistive technologies towards increasingly autonomous, agentic systems, the importance of regulatory intelligence and independent oversight will only increase.

The FCA's findings reinforce a fundamental principle: good AI governance is not demonstrated by deploying technology or producing more management information. It is demonstrated through accurate data, effective controls, accountable decisions and evidence of good customer outcomes.

For financial services firms, the priority must be to retain ownership of compliance, independently challenge AI outputs and ensure their boards receive reliable, actionable regulatory intelligence.

That is how firms can adopt AI responsibly while maintaining regulatory defensibility and customer trust.

Model Office – AI-enabled Regulatory Intelligence, Governance, Risk and Compliance.

Source: FCA, AI in financial services: good practice and areas for improvement, published 19 October 2026.

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---

 

| Sector | 2025 Revenue | Estimated Compliance Cost (20%) |
| --- | --- | --- |
| Retail investment | **£6.47bn** | **£1.29bn** |
| Mortgage | **£1.57bn** | **£314m** |
| Protection | **£27.70bn** | **£5.54bn** |

 Topics: [Financial regulation](https://resources.model-office.co.uk/topic/financial-regulation), [fintech](https://resources.model-office.co.uk/topic/fintech), [client engagement](https://resources.model-office.co.uk/topic/client-engagement), [regtech](https://resources.model-office.co.uk/topic/regtech), [Risk management](https://resources.model-office.co.uk/topic/risk-management), [practice management](https://resources.model-office.co.uk/topic/practice-management), [FCA](https://resources.model-office.co.uk/topic/fca), [HMT](https://resources.model-office.co.uk/topic/hmt), [Data](https://resources.model-office.co.uk/topic/data), [AI](https://resources.model-office.co.uk/topic/ai), [Risk,](https://resources.model-office.co.uk/topic/risk), [governance](https://resources.model-office.co.uk/topic/governance), [compliance](https://resources.model-office.co.uk/topic/compliance), [consumer duty](https://resources.model-office.co.uk/topic/consumer-duty)

#### Written by [Chris Davies](https://resources.model-office.co.uk/author/chris-davies)

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