Innovating financial service compliance with generative AI

Fabio Ardossi, Partner, Data Reply

The financial services industry must tackle an increasingly fragmented patchwork of regulations across their operating regions, especially with the UK’s recent Financial Services and Markets Act 2023 transforming the post-Brexit industry landscape. Compliance is essential to effective business and these changes have drastically increased the complexity of their associated tasks. Generative AI now stands as a solution to this complexity; where attention to the technology has primarily focused on its text and image generation capabilities, its utility extends beyond creative expression when placed in the hands of compliance professionals. It can automate complex procedures, streamline the management of ever-growing amounts of regulatory data, and apply it seamlessly to enhance the accuracy of regulatory reporting. Doing so will free compliance teams from the burden of putting out fires, enabling them to focus on more strategic activities.

Risk avoidance

Financial professionals must be fast on their feet, as things can change in seconds. Compliance needs to be able to ensure these decisions are, well, compliant, and thus must be able to respond as quickly to changes in the regulatory environment – avoiding risk and, at its worst, business harm. Generative AI excels in this regard, helping put two and two together to serve up insights from disparate documentation.

It makes compliance officers’ lives easier when responding to regulator requests: finding the correct document for the relevant procedure implemented by the new law – in seconds. Whilst it’s important to retain human review to ensure accuracy and avoid hallucination, with the agility the technology affords in the face of regulatory developments and the pace at which the technology is innovating, generative AI will be a boon to compliance professionals.

Driving process optimisation

From company handbooks and industry guidelines to parliamentary and international law, the rules that govern financial services spread across a vast regulatory topology – and they are constantly changing with amendments and updates, which poses an additional layer of complexity that compliance teams must contend with. As the legal landscape evolves, compliance teams need an arsenal of advanced technology or risk falling behind and facing sanctions for non-compliance.

While AI has been a familiar face in the tech stacks of the financial industry, generative AI represents a significant upgrade. Instead of using structured data as traditional AI does, generative AI models can work with huge amounts of unstructured data formats, allowing it to sort through policy developments across numerous jurisdictions and update monitoring systems in real-time. The optimisation of a process conducted by compliance officers drastically reduces the chance of human error, enhancing compliance capabilities and improving overall business performance.

The human element

Introducing new tools can transform business agility and performance. However, they can carry high barriers to adoption, including arduous training. Generative AI stands in contrast, often integrated into a chatbot UI, allowing even non-technical employees to use them to their full benefit. One can ask what the latest changes in the KYC requirements for onboarding new clients are and receive vital information on regulatory developments in concise, easy-to-consume, natural language. This accessibility reduces the learning curve for employees navigating complex and often interrelated regulatory information, making it easier for anyone to stay informed and compliant.

Domain experts also benefit from this powerful assistant, empowering them to unpack and navigate increasingly complex documents. With critical information at their fingertips, generative AI can reduce the barriers to education on regulatory changes. Additionally, it helps minimise common errors by always ensuring the most current information is used. Not only does this improve individual performance, but also the organisation, with a more productive and focused workforce.

Securing a competitive edge

Innovations in generative AI have come at speed, and for financial services firms to take advantage of the technology, they must ensure deployment within secure, private cloud environments. This security-conscious approach will help ensure sensitive company and customer data remains within their control, protecting against potential breaches and unauthorised access. With private cloud infrastructures, firms can protect their critical information whilst leveraging it as they embark on digital transformation. Furthermore, secure, private cloud environments help protect financial institutions from falling afoul of stringent regulatory requirements and industry standards concerning data protection and use, ensuring that the adoption of generative AI is innovative but also responsible and compliant with all relevant legal frameworks.

Generative AI promises to precipitate a leap in efficiency and accessibility for regulatory compliance. Incorporating AI-powered contextual understanding and proactive adaptability in compliance workflows allows financial institutions to streamline compliance efforts, mitigate risks, and empower their employees to make informed decisions. By integrating new technologies into their tech stacks, firms can better navigate the present complexities while guaranteeing future success. Those who take the leap no and invest in generative AI will be well-equipped to handle the regulatory challenges of tomorrow, ensuring a competitive edge in an increasingly complex and dynamic industry.

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