The Cyprus Securities and Exchange Commission (CySEC) has issued a warning to regulated financial entities about the increasing cybersecurity risks posed by advanced artificial intelligence (AI) models. In a circular, the regulator highlighted that frontier AI models can rapidly identify and exploit software vulnerabilities, potentially leading to more frequent and sophisticated cyberattacks on financial institutions and their ICT service providers.

CySEC advised firms, including investment companies, crypto-asset service providers, and fund managers, to review and strengthen their ICT risk management frameworks in compliance with the EU’s Digital Operational Resilience Act (DORA). The regulator emphasized improving vulnerability assessment, patch management, identity controls, and disaster recovery plans, with particular focus on third-party service providers and supply chains.

The commission stressed the importance of integrating AI-related risks into operational resilience strategies and maintaining robust detection, response, and backup capabilities. CySEC also indicated it will monitor AI developments closely and engage with firms to ensure preparedness, urging all financial institutions in Cyprus to remain vigilant as cyber threats evolve.