The rapid development of the regulatory environment poses ever new challenges for financial service providers. To remain compliant, companies invest a lot of time and money, but efficient solutions are becoming increasingly important for competitiveness. The integration of artificial intelligence enables banks to automate compliance processes and increase reliability at the same time.

Whether IT security, sanction screening, anti-money laundering or ESG requirements, compliance departments in banks are faced with a multitude of complex and constantly new tasks. In order to meet these requirements, new, partly manual processes are usually introduced and existing IT systems are adapted or expanded. This not only leads to a creeping increase in bureaucracy, but also makes compliance a significant cost factor. At the same time, non-compliance with legal requirements is not an option. Under the collective term “RegTech” (for regulatory technology), there are therefore more and more technical answers to the questions of intelligent and efficient compliance solutions.

Artificial intelligence (AI) can reduce costs and effort

AI algorithms can automate repetitive and time-consuming tasks, allowing staff to focus on complex and critical areas. In addition, these applications are able to process and analyse large amounts of data in real time, enabling faster and more accurate identification of potential compliance risks. This is particularly important in the banking/ and fintech sector, as many business areas, such as payment transactions, portfolio control and risk management, are already largely digitised.

One application example for AI in compliance is sanction screening: here, a system is used that creates alerts for conspicuous transactions and automatically informs employees. AI-based algorithms make initial (preliminary) decisions, which are then finalised by employees on the basis of the two-eye or multiple-eye principle. The alert itself can also be created directly by the system as an electronic file with all relevant information on the transaction in an overview. And once the AI algorithms are integrated, they can be regularly retrained to continuously increase accuracy and quality on a customer-specific basis.

Challenges and risks in the use of AI

Nevertheless, there are also challenges and risks when introducing AI solutions. Lack of know-how and lack of transparency due to so-called “black box” procedures are factors that often cause the use of AI to fail. But also insufficient (data) and process infrastructure, lack of maintenance, general cost reasons, data protection requirements as well as misuse and possible reputational risks hamper the use of these new technologies.

The explainability revolution that has begun now offers banks the opportunity to overcome many of these hurdles. State-of-the-art algorithms make it possible to open the “black boxes” and thus ensure explainability and transparency. This change has also already reached the regulators, where intensive technical specifications for AI applications are being developed. Artificial intelligence and other RegTech approaches are thus gradually becoming an integral part of the modern banking business – including in compliance.

Consileon is your partner for questions around compliance and AI

Consileon combines technical AI expertise with many years of banking experience and can provide you with targeted support in assessing whether and where AI is an option for you and in implementing it.

In specific customer projects, our experts have already successfully implemented complex AI applications at banks.