AI & ML: Compliance under control

Since the financial crisis of 2008, the global financial services industry has come under heightened scrutiny. New regulations were enacted that are focused on reducing the likelihood and magnitude of future financial crises. This meant a significant increase in the workload for compliance officers. For example, the Dodd Frank Act, which came into play in July 2010, had a whopping 2,000+ pages of provisions that compliance officers had to read, interpret, and implement.

More than a decade later, the world still feels the impact of one of the worst financial crises in tandem with an increasingly complex network of global trade and flow of money, thanks to greater internet access. Not surprisingly, this has meant new regulations are frequently introduced and keeping up with compliance requirements has become more challenging for companies. Europe, for example, enacted the General Data Protection Regulation (GDPR), the Market Abuse Regulation (MAR), MiFID II, and the 4th and 5th Anti-Money Laundering Directives in just the last few years.

Frequently updated rules and regulations now need financial institutions to regularly revisit their approach to compliance, particularly since breach of compliance is rewarded with hefty fines. Compliance departments are stretched and are constantly being asked to do more with less.

This situation is slowly improving thanks to the rise of regulatory technology (RegTech), which has disrupted the compliance industry by allowing FIs to improve efficiency with relatively reduced costs. RegTech aims to solve compliance-related issues, overhaul the daily lives of compliance professionals, and even elevate the profile of an FI. Artificial intelligence (AI) and machine learning (ML) in particular – when trained diligently – have made the greatest impact as they help ease the burden of tracking the innumerable compliance regulations by various regulatory bodies.

Here are four ways AI & ML are improving the way compliance departments operate:

Navigating through a myriad of data: With new or changed regulations, compliance officers must read through a multitude of documents to interpret the information, understand which of the changes impact the FI, and then build controls around them. This is a very time consuming and laborious task. AI & ML tools can save countless hours of manual processing by scanning and identifying any regulatory updates and making changes in the financial institution systems accordingly at the back end. This provides compliance officers with ample time to perform sanity checks and make sure all the updates have been covered.

Better decision making: Errors in the highly regulated financial industry can prove detrimental to the reputation of FIs. AI & ML systems can easily interpret immense amounts of data and make informed decisions within a very short period. This reduces human errors caused by inaccurately analyzing the nuances of large data sets and can save a significant amount of time and money for companies.

Streamlined reporting: Regulatory reporting is a very labor-intensive process as information needs to be pulled together from many different systems and tallied with various regulatory requirements across the globe. AI & ML systems can automate this to a certain extent because of their ability to read, validate, interpret, and consolidate information, thus churning out accurate and consistent reports.

Efficiency gains: AI & ML can bring in measurable efficiency and effectiveness to compliance operations by:

  • Automating processes that previously required human intervention
  • Identifying duplication of data, thus reducing the amount of content that needs review
  • Reducing costs by doing things faster and without human intervention

Conclusion:

Regulatory compliance is becoming challenging as fines for non-compliance are increasing year over year. Well trained AI and ML systems can improve compliance systems substantially as they address human error and offers value addition. FIs that can effectively harness AI and ML solutions will see measurable reductions in the cost and complexity of their compliance programs.

How Cenza can help:

Cenza has considerable experience in training AI systems and is certified by leading AI providers such as Kira Systems and Leverton. Our deep level expertise in ML helps our AI provider partners to streamline processes and lower the cost of adopting advanced RegTech technology.

AI providers partner with Cenza because:

  • We have invaluable hands-on ML experience and are certified in two of the leading ML systems.
  • We stay up-to-date on the latest technology and incorporate these solutions and platforms into projects.
  • We can rapidly assemble teams to train systems for simple or complex judgments.
  • We have access to the right expertise through our network of compliance subject matter experts.
  • We are cost-effective in terms of scaling up and are timely in our delivery.
Andrew Jardine

Andrew Jardine

Andrew provides advice to Cenza and their clients on how best to utilise legal services in conjunction with different legal technologies, achieving high quality and cost effective solutions. Andrew does this by leveraging his legal technology and strategy consulting experience gained during his time as an early stage employee at Kira Systems and while as a Consultant at Deloitte earlier in his career. In hisspare time Andrew publishes a legal technology podcast, “Legaltech Tapas”, helping people to stay informed about different legal softwares.

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