Financial services organizations employ AI to keep up with compliance

It is estimated that by the end of 2020, financial organizations will face as much as 300 million pages of regulations to comply with. This staggering number will place compliance teams under even more pressure, with manual processes already proving ineffective as compliance demands grow. With banks alone spending as much as 10% of their operational spending on regulatory compliance, this is leading to a growing demand for technology-based solutions. The rise of Regulatory Technology (RegTech) is easing the strain on compliance officers and teams, but it is AI that is proving to offer the most advantages. In the financial services sector, AI is becoming increasingly necessary for those financial organizations that rely on being up to date with an ever-growing quantity of external regulations.

The Challenge of Modern Compliance

To remain compliant, financial organizations need to tackle an overload of data. This includes customer records, every detail of every financial transaction, as well as communications like emails and phone calls. Add in the constant flow of regulatory updates that these organizations need to comply with and it becomes clear that the data that is presented to compliance teams can be overwhelming. A more cross-product view is essential, especially in terms of tackling fraud. However, with the vast amounts of data that compliance officers have to trawl through, a workload that includes cross-product review is often overlooked. Regulatory compliance has become a balancing act. If parameters are set to low, then false positives can become an issue, while going the other way and setting thresholds too high results in the potential to miss out on relevant changes.

Financial Organizations and Technology

When it comes to compliance, banks are already relying on technology. Advances like biometrics have proven very beneficial in the battle against fraud and financial crime, as have automation tools tailored specifically to the compliance sector. However, even big data analytics are proving to be too much for human compliance teams. That’s why AI is increasingly being looked at closely and adopted by those financial bodies that rely on being compliant. That’s because AI can automate the manual tasks of the compliance process, especially monitoring for updates. To be effective, regulatory intelligence needs to be faster, more accurate, and more revealing. AI allows for a more comprehensive response to Regulatory change meaning faster decision making to avoid gaps in compliance. This can transform the costs and the risks of manual compliance management.

AI and the Future of Compliance

There are concerns that the rise of AI in the compliance sector will result in job security worries. However, the goal of Regtech (and AI in particular) is simply to break down the vast volumes of regulatory documents into something more easily actionable. AI technology is a tool that eases the workload of a compliance team, removing the laborious manual processes and presenting them with the relevant regulatory changes that need to be addressed. This will result in a more defined compliance structure, with AI doing the hard work, and humans contributing the moral and responsible decision-making element to regulatory shifts. This will lead to a faster, more effective, and more beneficial system of regulatory compliance that will improve the services of financial organizations while reducing the potential for fines and reputational damage.

AI is rapidly becoming a technology that is going to be more prevalent than expected. It is already being used by millions of people every day, often without any real awareness of its presence. As AI continues to grow in terms of computational power and more robust machine learning, it is set to become the new normal for those financial organizations that rely on being compliant.