Enhancing Compliance and Risk Management with AI
The Essential Role of Artificial Intelligence in Financial Compliance
In today’s fast-paced financial landscape, executives agree that leveraging artificial intelligence (AI) has become imperative for businesses to successfully manage the evolving regulatory requirements and accelerated product development timelines.
Navigating a Complex Regulatory Environment
The Evolving Compliance Landscape
According to Alexander Statnikov, co-founder and CEO of Crosswise Risk Management, by 2025, compliance processes will fundamentally rely on AI due to the increased complexity of regulations. With varying regulations at state and federal levels, companies face the challenge of keeping up-to-date with frequent changes.
Statnikov emphasizes that the shift from two-year product development cycles to mere weeks necessitates the use of technology like AI to maintain compliance in a more efficient manner. Companies must also tackle the intricacies of ‘banking as a service’ and manage third-party risk effectively, which adds another layer of necessity for AI solutions in compliance efforts.
AI Enhancements in Risk Management
Streamlined Operations at JPMorgan Chase
At JPMorgan Chase, AI is incorporated into compliance and risk management protocols. Terah Lyons, the bank’s managing director and global head of AI and data policy, highlights the efficiency gains and reduction of paperwork due to AI interventions.
One notable application of AI is in fraud detection, where it has significantly decreased instances of false positives. This leads to fewer disruptions for customers, as they encounter less unnecessary transaction rejections. Lyons points out that effective fraud detection not only heightens customer satisfaction but also reinforces the firm’s overall cybersecurity efforts.
Collaborating with Regulators
AI is also beneficial in the regulatory space. JPMorgan collaborates with regulatory bodies that handle large volumes of paperwork, leveraging AI to improve their processing capabilities. This collaboration fosters better compliance across the industry, ultimately refining risk management strategies.
Combatting Inefficiencies in Compliance
Addressing False Positives
The issue of false positives isn’t limited to fraud detection; it often appears in compliance tasks as well. Employees may mistakenly assume a case is non-compliant, leading to unnecessary investigations. Artificial intelligence helps identify these instances so that compliance staff can concentrate on genuine concerns.
Anthony Soohoo, CEO of MoneyGram, suggests that AI enables compliance teams to focus their efforts on true compliance issues rather than on false alerts, improving the overall effectiveness and efficiency of the compliance process. He notes that this shift likely leads to higher job satisfaction for employees, who are relieved from tedious tasks and can engage more meaningfully with their work.
Building Organizational Trust in AI
Cultivating Acceptance Among Staff
For organizations like JPMorgan, fostering trust in AI is vital for successful implementation. Lyons explains that the bank has adopted a hands-on approach by conducting smaller, internal trials of AI applications, scaling up from successful examples. Demonstrating measurable value is key in onboarding staff to the use of AI technologies.
The Need for Real-Time Monitoring
Soohoo underscores that the compliance process remains highly inefficient, calling for innovative changes. He identifies AI’s potential for real-time monitoring as a game-changer in compliance practices. By automating the process of reviewing documents and maintaining compliance standards, AI streamlines oversight, allowing for more proactive compliance measures.
Embracing the AI Revolution
With predictions that AI technology will continue to evolve and improve, Soohoo encourages companies to embrace this change. Organizations that adapt quickly to the integration of AI in compliance and automation will find themselves more agile in meeting industry needs.
He likens the current shift to the advent of the internet and personal computers, suggesting that resisting this transition would be counterproductive.
Lyons reinforces the idea that mastering AI and its applications in risk management is essential for long-term success in the financial sector. As competition heightens, firms that effectively utilize AI will gain significant advantages and deliver better customer experiences, which are crucial for building trust in today’s financial environment.
