AI & Data Protection: Compliance Catches Fire under FCA CP25/2
When the Regulator Starts Asking How Your AI Thinks
The FCA’s Consultation Paper CP25/2 – Regulating the Use of Artificial Intelligence in Financial Services (January 2025) quietly signalled the start of a new regulatory chapter. For the first time, the FCA is proposing mandatory AI Risk Registers, model validation governance, and senior-management accountability — aligning directly with the UK DPDI Bill, now at its final Commons stage.
Together, these frameworks confirm what most firms still underestimate: AI compliance is data-protection compliance.
Article 22 of the UK GDPR, soon to be reframed under the DPDI Bill, and Principle 12 of CP25/2 share one message — you can’t automate what you can’t explain.
Yet implementation lags badly. Many firms cannot yet articulate which algorithms underpin client outcomes, how bias testing is evidenced, or who “owns” AI logic under SMCR.
The ICO & DSIT Joint Statement on AI and Data Governance (March 2025) goes further — warning that firms must demonstrate lawful basis for every dataset used in machine learning, even synthetic data.
The regulator has become your auditor, your technologist, and your ethicist — all at once.
Why It Matters
Compliance teams are being pushed beyond legal analysis into technical validation. The old “black box” defence is dead; in its place comes “regulatory transparency by design.” Boards that fail to link AI governance with DPA frameworks will face the same scrutiny once reserved for AML or credit risk.
Legislative Snapshot
- FCA CP25/2 – Regulating the Use of Artificial Intelligence in Financial Services (Jan 2025)
- ICO / DSIT Joint Statement on AI & Data Governance (Mar 2025)
- UK DPDI Bill – Commons Report Stage 2025
Can your firm evidence every AI-driven decision — and prove that every dataset used was lawfully processed? Sadly, an inevitable outcome that will no doubt become a mandatory requirement when the regulators eventually catch up with enforcement and fines as observed with DPA/GDPR non compliance.
This article was originally published on LinkedIn.
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Gavin Ignatius Persaud
Solicitor | Fintech Law Specialist
Gavin is a specialist solicitor with over 25 years of experience in financial technology regulation, digital assets law, and emerging technology compliance. He advises premier financial institutions and innovative technology companies on complex regulatory matters across 33 jurisdictions.
Qualifications: PhD (Cryptocurrency & Stablecoin Policy), LLM (Commercial Law), Solicitor of England & Wales
Experience: £750M+ transaction value | 33 jurisdictions | Trusted adviser to Morgan Stanley, American Express, Visa, Citibank, and leading fintech innovators
Regulatory frameworks governing artificial intelligence in financial services