Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), has issued a cautionary statement regarding the UK financial system’s readiness to handle the increasing geopolitical and cyber threats impacting the global economy. Speaking at the City Dinner at Mansion House in London, Rathi emphasised that the repercussions of modern conflicts now extend to “balance sheets, funding, markets and consumers as much as any battlefield.”
He highlighted the potential consequences of cyber-attacks and production shocks, which can affect yields and undermine confidence, stating, “We are not prepared, tactically or strategically.” Rathi’s warning coincides with rising geopolitical tensions and repeated cyber incidents targeting financial infrastructure, including attacks on ATMs, payment systems, and shipping routes like the Red Sea corridor.
Rathi pointed out that UK firms might be significantly under-insuring against systemic and catastrophic risks, leaving businesses—and ultimately taxpayers—vulnerable. He noted, “Globally, a fraction of catastrophe and cyber risks are insured. The rest migrate to company P&Ls, credit ratings, risk premia, prices, and ultimately to households. And when cover is this low, it hits the Exchequer. That, along with the impact on livelihoods, drives popular anger.”
The FCA’s concerns were echoed by the latest findings from the Napier AI / AML Index 2025–26, revealing that money laundering in the UK increased to £146 billion over the past year, up from £135 billion. The UK’s status as a global financial hub has heightened its susceptibility to illicit capital flows, with financial crime estimated to drain $195 billion (£160bn) from the UK economy annually—equivalent to 5.35% of GDP.
Greg Watson, CEO of Napier AI, described the data as indicative of a “systemic issue” undermining the nation’s economic resilience. He stated, “Financial crime continues to erode the resilience of the UK’s financial systems. Our data shows up to $3.3 trillion globally could be recovered through AI-enabled detection and monitoring. But building resilience against financial crime isn’t a technology challenge alone. It requires collective action between regulators, financial institutions and technology providers to ensure AI adoption is responsible and effective.”
Rathi’s address followed the Treasury’s confirmation of a comprehensive overhaul of the UK’s anti-money laundering (AML) regime, which will see the FCA assume a “super-regulator” role over professional services. Under the reforms, the FCA will directly supervise lawyers, accountants, and company formation agents for compliance with money laundering rules, incorporating these professions into its expanded AML remit for the first time. This initiative aims to strengthen systemic oversight and reduce fragmentation within the UK’s compliance landscape.
Financial crime experts suggest that Rathi’s remarks represent a significant escalation in the FCA’s public messaging regarding systemic risk and operational resilience. The watchdog is anticipated to advocate for increased cross-sector collaboration and investment in AI-driven regulatory technology as part of its 2026 strategy. Analysts also predict the regulator will prioritise stress-testing for cyber resilience and liquidity risk management amid concerns that global tensions and digital vulnerabilities could introduce new financial contagion channels.
