now loading...
Artificial intelligence ( AI ) is changing the financial services sector faster than most imagined. The Dubai Financial Services Authority ( DFSA ), the independent regulator of the Dubai International Financial Centre ( DIFC ) – the leading financial hub in the Middle East, Africa, and South Asia region – is seeing this momentum in real time. Our own 2025 DFSA survey of more than 650 authorized firms in the DIFC demonstrates the trajectory: the number of financial services firms using generative artificial intelligence ( GenAI ) has nearly tripled since 2024. Recent comparable regulator-led surveys, such as one by the European Banking Authority in September, confirms that most banks in the European Union are already using AI in some form.
For regulators in international financial centres, that rapid growth brings an imperative to address rising risks: inaction on AI is simply not an option. As AI adoption accelerates, it creates risks driven by factors such as widespread reliance on a limited number of providers, for example, potential exposures to cybercrime, and potential gaps such as indirect, malicious prompt injection and data poisoning attacks. Addressing these risks is essential for maintaining investor confidence and long-term stability in the market.
These risks make continued dialogue between regulators in international financial centres, like Dubai and Singapore, more critical than ever in delivering regulatory clarity and mitigating systemic risks associated with AI.
The mission for regulators such as the DFSA has not changed: to protect consumer interests, strengthen risk controls, and maintain financial stability. This core mission needs to be built into the use of AI for the potential of AI to reshape financial services across credit assessment and scoring, risk modelling, financial crime, and fraud detection – and much more.
Caution and clarity
Our survey found that most firms are using AI in support functions such as legal, finance, and risk management, rather than in customer-facing services. This reflects a natural and important caution. GenAI is being harnessed for efficiency gains rather than transformation, and few have ventured into deploying AI agents as key decision-makers. Robust testing remains important.
Our survey also highlights gaps in governance, with some firms still lacking frameworks around AI, and a heavy reliance on third-party providers for cloud-based AI services, bringing data management risks and systemic risks ( mentioned above ) that require ongoing attention.
These findings echo what we highlighted in the DFSA’s Cyber and AI Risk Report, published in June 2025. The report, a follow-up to the DFSA’s inaugural Cyber and AI Risk Regulatory College which brought together 70 senior representatives from 18 financial authorities across the Middle East, North America, Europe, Africa and Asia at this year’s Dubai Fintech Festival, identified AI as both a driver of efficiency and a source of emerging vulnerabilities – particularly where systems depend on large datasets and external service providers. The insights from that report, together with the findings of this latest survey, paint a clear picture: AI offers powerful tools to mitigate existing risks – yet it also introduces new challenges, and emerging areas of exposure that demand thoughtful oversight.
Closer collaboration
Addressing new and emerging risks requires closer collaboration: between regulators and the industry, and among regulators themselves. The Monetary Authority of Singapore’s ( MAS ) Project Mindforge, which examines the particular risks and opportunities created by GenAI, is a good example of this forward thinking.
The DFSA and MAS have a longstanding relationship through a memorandum of understanding and a fintech agreement established in 2008 and 2018, respectively, complemented by active engagement in global platforms like the International Organization of Securities Commissions ( IOSCO ) FinTech Task Force and the Global Financial Innovation Network. We are also grateful for opportunities to collaborate with the Bank for International Settlements ( BIS ) in Singapore, working at the intersection of innovation, regulation, and global financial stability. As capital flows between Asia and the Middle East grow and more institutions operate in both hubs, so too must cooperation on regulatory frameworks that give firms confidence and clarity across borders.
This is why I am here in Singapore this week – to meet with peers and financial institutions and continue the dialogue. The Singapore FinTech Festival is not just a showcase of innovation – it’s a vital platform for open discussions and alignment that will shape the future of financial services.
Establishing robust yet progressive regulatory frameworks for this transformative technology, and ensuring a degree of consistency for all the firms we regulate, will be a critical factor in the future competitiveness of financial centres. Regulators must help set the rules – and the tone – for how AI transforms financial services. At the DFSA, we are determined to do exactly that: continue to work together with firms, with our counterparts around the world, and with the market itself to ensure that AI delivers on its promise without compromising the trust that underpins financial services.
Justin Baldacchino is managing director, supervision, at the Dubai Financial Services Authority ( DFSA ).
