Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), has warned that the UK’s financial system is “not prepared” to withstand the growing wave of geopolitical and cyber threats facing the global economy.
Speaking at the City Dinner at Mansion House in London, Rathi said the impact of modern conflict now reaches “balance sheets, funding, markets and consumers as much as any battlefield.”
“Whether it’s a cyber-attack or a production shock – they move yields and test confidence,” he said. “And we are not prepared, tactically or strategically.”
Rathi’s warning comes amid escalating geopolitical tensions and repeated cyber incidents targeting financial infrastructure, including attacks on ATMs, payments systems and shipping routes such as the Red Sea corridor.
He said UK firms were “potentially massively under-insuring” against systemic and catastrophe risks, leaving businesses – and ultimately taxpayers – exposed.
“Globally, a fraction of catastrophe and cyber risks are insured,” Rathi noted. “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 warning was reinforced by new findings from the Napier AI / AML Index 2025–26, which show money laundering in the UK rose to £146 billion over the past year – up from £135 billion.
The UK’s position as a global financial hub has made it increasingly vulnerable to illicit capital flows, with the report estimating that financial crime drains $195 billion (£160bn) from the UK economy each year – equivalent to 5.35% of GDP.
Greg Watson, CEO of Napier AI, said the data highlighted a “systemic issue” undermining the country’s economic resilience.
“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,” Watson said.
“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.”
The speech followed the Treasury’s confirmation of a sweeping 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 – bringing these professions within its extended AML remit for the first time.
The move comes as part of efforts to tighten systemic oversight and reduce fragmentation across the UK’s compliance landscape.
Financial crime experts say Rathi’s comments mark a significant escalation in the FCA’s public messaging around systemic risk and operational resilience. The watchdog is expected to push for greater cross-sector collaboration and investment in AI-driven regulatory technology as part of its 2026 strategy.
Analysts also expect the regulator to prioritise stress-testing for cyber resilience and liquidity risk management amid fears that global tensions and digital vulnerabilities could trigger new financial contagion channels.
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FCA chief warns UK financial system “not prepared” for rising global and cyber risks