FCA AI Governance Framework for UK Financial Services

The FCA expects regulated firms to govern AI and machine learning responsibly under existing principles for business. This template maps FCA expectations to concrete governance controls for firms using AI in regulated activities.

Quick Answer

The FCA governs AI in financial services through existing principles rather than AI-specific rules (as of 2026). SMCR accountability for AI, explainability under Consumer Duty, bias testing, and model change management are the key expectations. The FCA is developing AI-specific guidance — firms should monitor the AI Sandbox outputs.

Compliance Checklist (8 items)

Map all AI use cases to FCA Principles — Principle 3 (management and control), Principle 6 (customers), Principle 7 (communications) are most relevant
Appoint a Senior Manager with accountability for AI systems under the Senior Managers and Certification Regime (SMCR)
Document the purpose, data inputs, decision logic, and limitations of every AI model used in regulated activities
Implement explainability for customer-facing AI decisions — FCA requires firms to be able to explain decisions to customers
Conduct regular bias and fairness testing — FCA Consumer Duty requires good outcomes for all customer groups
Establish a model change management process — material changes require re-validation and potentially FCA notification
Include AI governance in your firm's annual SMCR attestation and board risk reporting
Monitor FCA AI Sandbox and Innovation Hub outputs — the FCA is actively developing AI-specific guidance

Penalty if not compliant

FCA enforcement under Principles for Business: unlimited financial penalties, requirement for redress to customers, senior manager disqualification. Consumer Duty failures attracting poor AI outcomes: FCA action and reputational damage.

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FCA AI governanceAI financial services UKSMCR AI accountabilityFCA Consumer Duty AImachine learning FCAFCA model governance