How Artificial Intelligence Can Assist Compliance


Artificial Intelligence has been around for 70 years now, but in the past 10 years, it has become more and more feasible. Scientists, academics and business owners are very optimistic about the future of AI and how it could change the way we live. We have been seen these changes and technological advances every day around us and in many industries.

In the financial industry with the high demand for services, such as online insurance and virtual banking, regulators are creating and pressuring for more control over financial services. These new technological services increase risks and require a well-established compliance program within the organization. 

Is your company ready to use AI?

Within the regulatory compliance segment, AI is growing. Managers have been exploring AI to monitor businesses and individuals to ensure compliance. AI has been helping regulators and the regulation to maintain compliance, reduce the risks and challenges faced by the industry.

Companies need to be open to changes to benefit from the technology. Creating a plan to incorporate technology and understand how it can help your business is essential in this fast pacing industry. You need to make sure that stakeholders are well able to adopt the changes and use technological tools. It is important to invest time and resources before implementing Artificial Intelligence into the compliance process. Once the system is implemented it will just help the company to get stronger, faster and better in the process of compliance. 

“Mature technological capabilities are readily available, but compliance departments need to put them to work effectively to transform their firms’ risk outlook.” - Steve Culp, Senior Managing Director, Accenture Finance and Risk Services.

Cost and risk reduction

Along with the increase of control over financial services, firms are finding it difficult to keep up with the costs of tracking the regulation changes and reporting processes to the authorities. 89% of compliance executives ensure that their costs have increased in the past two years. Making sure the company is aligned is important to avoid high-cost fines for non-compliance.

Human error can also cost large sums of money to firms and prevention is imperative. Data Breach has been the cause of most of these fines and it has brought control pressure on regulators. Firms are obliged to track, manage and analyze a high volume of data about customers and operations. The amount of information increases the chances of human error when the processes are manual or mostly manual. “AI technologies can shed light on blind spots, reasonable errors, and other things that humans may not necessarily pick up on” RegTech Innovation.

A recent survey report shows that 32% of financial organizations plan to increase the number of employees in the compliance department. However, this number could be smaller with the use of advanced technologies, thus reducing the costs and the probability of human error. It doesn't mean a replacement for humans in the compliance arena, but technology adds another layer of protection for firms.

When it comes to more manual work, technology can identify patterns or trends in employee activities faster than humans, it enables firms to take actions faster and ensure adherence to regulations. Technology enables firms to complement existing processes and procedures to improve oversight and compliance.

Top tips for better use of AI

  • Have defined problems and answer for them: have the scope of the problem you want to address, and potential answers are important to measure the effectiveness of the technology.
  • Apply the technology to the right problems: low-volume compliance tasks or the ones that require human judgment aren’t within the remit of AI technology just yet. 
  • Reduce complex problems by collecting the right data: it’s important to set up a “training data” that will allow the system to collect just what is necessary in order to feed it with the right outcomes. 
  • Don’t leave AI alone: you should use your powerful human expertise and experience in the process to take advantage of all resources. As these technologies are still in development, the junction of both (machines and humans) is what makes AI successful.
  • Don’t forget GDPR and Data Protection: with numerous data breach cases in the industry, data protection should be always looked after, especially in the European market.

Compliance monitoring and artificial intelligence

Artificial Intelligence is a broad term and overlapping of different technologies and concepts. AI can include technologies such as Machine Learning, Neural Networks, Deep Learning, and Natural Language Processing among others. Although, not just AI can be implemented to leverage compliance. Other tools and technologies can also make you move from manual processing, which is highly dangerous for risk control. These technologies can be added to others and be adjusted for each company as they have different needs. AI or not, your company must have a strategy to embrace new technologies.

If you are in Compliance, you probably have heard of RegTech, regulatory technology, which aims at making regulatory compliance easier and more automatic. In the financial services industry, such technologies are very helpful as failing to comply with rules and regulations may lead to the businesses subjected to financial penalization, disrepute, and in extreme cases, criminal litigation and imprisonment.

RegTech address the challenge of keeping track of regulations by different regulatory bodies and help firms to make changes to their internal processes and practices. Financial services firms are also required to document and report their processes to regulatory bodies periodically or when requested. These firms' compliance programs must deal with growing amounts of data and reporting so Compliance needs tools to monitor risks, identify conflicts of interests and fulfil obligations.

Any technology implementation requires discipline from managers and stakeholders. Having it as a powerful tool will make your company compliant, your process more effective and benefit all in the organization.

MCO has a set of innovative products and we lead the change in areas such as compliance in the control room – ensuring that the deal cycle moves more quickly but stays in lockstep with regulations. If you want to know more about the benefits of technology in compliance contact MCO today. 

If you like this topic and were curious to know more about compliance management technology we have a webinar that covers recent SEC guidance and risk alerts on the lack of adequate technology as a deficiency in compliance programs. The speakers discuss the concept of minimum technology standards, and how firms can use both minimum technology standards and automation to effectively manage compliance. You can watch the on-demand webinar HERE.