AI and Regulatory Compliance

AI and Regulatory Compliance

Despite the fact that most people cannot adequately explain artificial intelligence (AI) in basic words or really understand all the software’s capabilities, the term has become a dinner table discussion topic over the last ten years. AI doesn’t have to be cryptic or abstract. While technology has enabled people to create self-driving cars and computers that can understand speech, it may also be used to increase the efficiency of everyday corporate procedures. Over the next five years, regulatory compliance will almost certainly undergo a huge transition as teams adopt AI to become more efficient and better identify misbehavior.


A computer system that augments human capabilities by finding patterns in data, understanding from experiences, and making data-driven judgments is known as artificial intelligence (AI). Compliance, on the other hand, has had a different experience with technology adoption. We anticipate that this will change and that using AI to manage regulatory risk will become the norm.


The Importance of AI in Regulatory Compliance

So what’s the role of AI? AI’s capacity to process enormous amounts of data quickly and accurately has the potential to revolutionize regulatory compliance. In the near future, technology can aid corporate executives in simply understanding compliance obligations and taking appropriate action. The ongoing use of AI in regulatory compliance may completely eradicate the need for humans entirely.


While the possible advantages of technology developments in AI are limitless, actual uses of AI in regulatory compliance systems have already established at least three distinct advantages for regulatory compliance officers, and these are lowering costs, minimizing false positives, and correcting human error.


1.    Lowering Costs

Regulatory requirements centered on the administration and analysis of large data are forcing modern financial organizations to adapt. Regtech software developers are employing AI to improve compliance efficiency and cut costs by automating activities that formerly needed time-consuming manual labor.


AI, especially when combined with Machine Learning (ML), has the ability to automate workflow. As a result, compliance activities will require less time and productive capacity. This, combined with the increased accuracy gained through the successful integration of AI and ML technology, has the potential to save financial firms millions of dollars in annual compliance expenses throughout the industry.


2.    Minimizing False Positives

Large banks are seeing disturbingly high rates of false positives in their compliance systems. Nearly every day, hundreds, if not thousands, of false positives are generated by compliance alert systems depending on conventional technologies. Each of these malicious activities must almost always be examined by a human compliance officer, which opens the door to inefficiency and human mistake.


Sophisticated corporate IT solutions can tackle the problem of false positives that waste banks’ time and expenses every day by employing AI and ML to acquire, analyze, and filter thousands of data elements. For instance, ML technologies can help compliance officers better manage their operations by automatically categorizing and alerting them to significant updates, events, and activities relevant to compliance. Because AI and ML apps are designed to learn from compliance professionals’ own data, they can improve compliance alert systems to near-perfection.


3.    Correcting Human Error

Human error costs regulated sectors billions of dollars every year, whether due to insufficient due diligence, antiquated technology, or ineffective processes. Due to the global financial crisis, banking regulations mandate that compliance managers at large banks track, manage, and analyze precise data about transactions, clients, and operational activities. The sheer volume of data creates the potential for misunderstanding, which can easily lead to human mistakes. And, as regulatory compliance becomes more technology-driven by the day, AI and ML solutions can help mitigate the effects of human error.


AI and ML tools, like utilizing a calculator to double-check manual calculations, can reveal blind spots, logical errors, and other issues that humans might miss. In addition, competent AI and ML systems can recognize trends and patterns, which is very useful for financial institutions wanting to reach out to knowledgeable millennial and generation-z customers.


In Summary

The task of complying with regulations is becoming increasingly difficult. While no technology can solve all the problems that compliance officers face today, well-implemented AI and ML solutions can significantly improve compliance systems. With consequences for noncompliance rising year after year, any technology that can eliminate false positives, cut expenses, and account for human error is a vital addition to regulatory compliance procedures. The first organizations to successfully harness AI and ML technologies will experience significant cost and complexity improvements in their compliance operations—a vital competitive advantage in today’s competitive financial services industry. 

Have Questions?

Want to find out more about how Resilience3™ security, risk, and compliance solutions will improve your business resiliency?