Using Artificial Intelligence to Drive Compliance

There are many different applications for artificial intelligence (AI). Some are ready now, such as using the processing power of AI to crunch big data to gain customer insight. Others, such as deploying AI within driverless vehicle computers might be another year or two from being fully ready. But amidst the discussion around AI, one element of modern business is generally overlooked – compliance and governance.

To be compliant and on the right side of governance laws around the world is incredibly vital. The European Union’s General Data Protection Regulation (GDPR) that comes into effect on 25 May 2018 is a high-profile example. Every organisation – irrespective of where in the world they are located – will have to comply with GDPR if they hold or collect data on European citizens. Failure to do so will result in fines of up to €20,000,000 or 4% of an organisation’s annual global turnover, whichever is greater.

[clickToTweet tweet=”Organisations manage #compliance and #governance manually. Using just an Excel spreadsheet for complex #regulations.” quote=”Yet many organisations continue to manage their compliance and governance functions manually. They use no more than an Excel spreadsheet to stay on top of increasingly complex regulations.”]

Yet many organisations continue to manage their compliance and governance functions manually. They use no more than an Excel spreadsheet to stay on top of increasingly complex regulations. What challenges are organisations facing with regard to compliance? Could AI be about to drive a new era of automated compliance?

Compliance challenges

Compliance is a never-ending process for businesses, and the regulatory requirements across most industries are constantly evolving. This is especially true in heavily-regulated sectors such as financial services (FS). New regulations such as MiFID II and MAR increase the regulatory requirements for FS firms. This is also true for initiatives yet to take effect such as GDPR. This will impact on what is needed to remain compliant.

Barriers to international trade are much lower in modern business, which means that many organisations do business in an array of different countries all over the world. Each country (and trading block, such as EU) has their own regulations and requirements for remaining compliant. This makes the task even more of a challenge.

Most larger organisations have their own officers and teams to deal with being compliant, liaising with regulatory bodies and governments. They are, however, still frequently managing it manually. Such approaches can leave an organisation vulnerable to rapidly changing circumstances. It also raises risk of facing penalties for non-compliance.  It all means that attempting to stay on the right side of all this regulation can feel like a significant challenge.

Digital compliance

However, there is another way of managing governance that smarter organisations are already using – digital compliance. This is an automated approach that ensures being compliant. It helps take the strain from beleaguered teams that currently manage it, too.

To be effectively compliant, you need precision. You also need to be systematic, and you need to be up to date. This can be done using a spreadsheet, database or SharePoint. These methods all require human input though, and humans are fallible. However, if you have an automated tool that takes away the hassle of managing it, it mitigates the risk of failure much more effectively.

This entails a combination of automation tool, along with input from industry experts and thought leaders. This can help map the compliance requirements faced by an organisation, across territories, sectors and a range of other areas.

But for 2018, the next wave of compliance could be based around artificial intelligence. This is something the Financial Conduct Authority (FCA) is giving serious consideration to. The independent UK financial regulatory body is looking into how AI could be used to enforce regulatory compliance, and is evaluating a number of options that would help reduce risk and allow the FCA to put out rules which are written manually but can be fully and unambiguously interpreted by computers at financial firms.

AI and a new wave of compliance

That would be a significant move by the FCA and is probably still a while away from becoming a reality. But that’s not to say that organisations cannot use AI themselves to manage compliance. The sheer volume of data that compliance professionals must now make sense of is growing continuously, and it gets harder and harder for humans to do so, certainly in the desired timeframe.

So using AI to analyse large amounts of data and find patterns, trends and connections within that data, feels like a much more efficient and effective approach to compliance. The more data that is given to AI technology, the faster it will learn, helping to detect any compliance issues and delivering actionable insight to a compliance officer or team.

Although compliance is a business function relatively untouched by digital technology, the computing power that AI offers means that organisations will increasingly adopt AI for governance and compliance over the coming years. However, we probably aren’t quite yet at the stage where AI-enabled compliance functions will completely replace humans. Compliance officers will continue to have a significant role to play in most organisations, and the deployment of AI should be used to enhance such teams, not replace them.

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