How AI Can Boost Compliance

According to the Thompson Reuters, Cost of Compliance report, the most common cited problems by compliance professionals are increasing regulatory burden, compliance with anti money laundering requirements, culture and risk, availability of skilled resources.

Those problems are likely to become even more serious after COVID-19 as financial services companies seek to maintain business resilience throughout this unprecedented crisis. Costs will be cut and the compliance department will be one of the first to face scrutiny.

This was already happening before the outbreak. According to Accenture, most compliance departments are having their budgets cut and are being presented with cost reduction targets.

This comes despite the compliance department moving to the fore in recent years. Since 2008, regulators have been tightening their oversight and are constantly adjusting guidance – and bringing in new regulations. Each update will bring new requirements for firms to comply with. Keeping up to date with the evolving landscape and ensuring your teams are doing everything they can to stay the right side of the rules is a constant struggle.

Secondly, the rise of cybercrime and the increasing tendency of businesses to handle data remotely has also seen regulators ramp up the pressure on firms to ensure clients have control over their data, to keep that data safe and identify where breaches occur as quickly as possible.

Thirdly, the need to comply with regulations and maintain the integrity and resilience of systems has seen a dramatic increase in the data management and administration requirements of firms. More than ever, they need oversight of their key systems and to process information and control their data.

For example, if a client asks for their data to be deleted or altered, as they are able to do under GDPR, firms must be able to retrieve that information as quickly as possible and feel certain that they haven’t left some of that client’s personal data lying around somewhere.

Equally, MiFID II requires that they maintain a complete record of all communications with clients over business dealings. They will have to ensure this data is stored safely and can be retrieved at short notice to satisfy regulators.

Compliance teams will also need to maintain a transparent trail of evidence demonstrating what steps they have taken to comply with the regulations. The burden is heavy. However, all this work drives zero revenue into the company which is why compliance is traditionally one of the first candidates to be trimmed.

The challenge is familiar: to do more with less. At a time when workloads are being upped they are being asked to cut costs.

Unsurprisingly, therefore, firms are investing in AI and automation technologies which can variously reduce costs, streamline operations, improve oversight and reduce the risks of human error.

Some of the most common areas in which AI and automation are being used include:

Monitoring regulatory sources:

Applications can constantly monitor regulators for changes and updates to the regulations. They can notify the compliance team who can then determine what action they should take. Systems use natural language processing (NLP) algorithms to analyse news releases and extract salient information.

Checking compliance with regulations:

Both firms and regulators are making use of applications which monitor a firm’s compliance. Rather than spending time on audits, these applications can alert compliance officers and authorities to breaches, record evidence and prompt the user to take action.

Processing large quantities of text and other data:

New regulations normally get to the market in the form of lengthy documents, often comprising hundreds of pages. Compliance officers and business leaders may not have the time to go through all documents. However, applications can use natural language processing to read through the documents and extract the key actionable highlights.

Such systems are not fool proof. They rely on the AI working as intended in order to deliver value. By automating systems, businesses assume they are eliminating the risk of error. However, they are placing a huge amount of faith in the algorithms underpinning the application. Due diligence will be essential to ensure systems can deliver on their promises.

Even so, automation can significantly improve outcomes for businesses. On the one hand they will be able to reduce the time and attention spent on compliance, while on the other, the increased oversight they offer will provide value in many different ways. It will shine a light on areas of the business which hitherto remained in the shadows. As such, they can even help a business improve performance, cut risks and identify revenues. They help take compliance from being an administrative function and turn it into a proactive tool in driving the business forward.

If you would like to understand more about how AI can help your compliance efforts, please get in touch and we will be happy to guide you. We can offer a trial to demonstrate just how effective our systems are.

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