4 Ways to Utilize AI to Secure Financial Risk and Compliance

Marketing Team
Published on December 28, 2021

AI for Financial Risk Management

Artificial intelligence is increasingly being acknowledged across industries for its ability to drastically improve a company's day-to-day operations. AI/ML has become synonymous with enhancing efficiency and productivity while lowering costs in risk management. This has been made feasible by the technologies' ability to process and analyze enormous amounts of unstructured data at a faster rate with far less human participation. Businesses and financial institutions have also been able to reduce operational, regulatory, and compliance expenses while gaining precise credit decision-making capabilities thanks to technology. As a result, AI/ML systems may provide significant amounts of timely, reliable data, allowing financial institutions to build expertise around customer intelligence, allowing for successful strategy implementation and reducing possible losses.

Regulatory Change Management

AI can find trends in large amounts of text, it can gain a better knowledge of the ever-changing regulatory environment, and avoid fines and other expenditures.

Financial services must mix content from thousands of regulatory papers to successfully handle regulatory change. Regulatory changes necessitate adaptations that necessitate collaboration between various business units and have second-and third-order consequences. Financial services reporting also entails a plethora of documentation and time-consuming processes. Natural language processing (NLP) and intelligent process automation (IPA) can help you achieve compliance standards in this case. Furthermore, NLP can evaluate and classify documents, extracting important information such as client information, goods, and processes that may be impacted by regulatory change, allowing the financial institution. With successful AI adoption, financial firms can overcome hurdles such as large fines for non-compliance. Because AI can find trends in large amounts of text, it can gain a better knowledge of the ever-changing regulatory environment and avoid fines and other expenditures.

Reducing False Positives

AI can increase the efficiency of false positives & compliance operations and decrease costs in today's data-driven compliance environment.

The traditional rule-based compliance alert systems used by financial organizations are generating a substantial number of false positives. Thousands of false positives are reported each day by compliance alert systems based on standard regulatory technologies. Each of these false alarms must be examined by a compliance officer, which introduces inefficiencies and the possibility of human mistakes. The application of AI and ML to record, extract, and analyze numerous critical data items can streamline compliance alert systems to near-perfection, reducing false positives. By categorizing compliance-related actions autonomously and alerting them to significant updates, events, and activities, AI can increase the efficiency of compliance operations and decrease costs in today's data-driven compliance environment. AI and ML apps can streamline compliance alert systems to near-perfection since they are built to learn from compliance officers' own data. In today's data-driven compliance environment, AI technology can improve the efficiency of compliance operations while lowering expenses.

Enhance Fraud Protection

AI learns to find data anomalies to avoid any anomalous fraud activity against a preset data set.

The use of artificial intelligence (AI) to combat fraud is currently common and will only grow in the future. Transaction history, together with other structured and unstructured data, can be used by AI to spot abnormalities that could suggest fraud. Identifying data anomalies is an important part of data comprehension. Normal patterns in data can be learned by submitting huge datasets to machine learning tools and statistical methodologies. Anomaly detection algorithms can isolate anomalous activity and highlight any occurrences that do not match the taught patterns when inconsistencies emerge. Anomaly detection algorithms can assist businesses in identifying and reacting to odd data items. For the detection of fraudulent transactions or non-compliant practitioners, a bank security system may use anomaly detection. By studying the context surrounding anomalous actions, businesses can identify patterns that are undetectable to the human eye or too subtle to be detected by existing rule sets, as well as correlate isolated anomalies into new attack routes using graph analytics and AI.

Reduction of Human Error

With regulatory compliance becoming increasingly technology-driven, AI and ML solutions can help mitigate the effects of human error.

Every year, human error costs billions of dollars to regulated industries. Ineffective methods, outdated technologies, and neglect, to name a few, are all sources of human mistakes in asset management. Compliance officers are required by financial regulations to track, manage, and analyze specific data concerning transactions, clients, and operational activities. The sheer volume of data creates a various potential for misunderstanding, which can easily lead to human mistakes. With regulatory compliance becoming increasingly technology-driven, AI and ML solutions can help mitigate the effects of human error. AI and ML can reveal blind spots, reasonable errors, and other views that people may miss. In addition, competent AI and machine learning programs can detect trends and patterns. A comprehensive data strategy defined by analyzing enormous volumes of data scalably, a transparent foundation for model risk management, and connecting real-time insights for rapid response is required for a modern approach to risk and compliance.

Download Guide as PDF