Today, there is a lot of buzz about AI and its implementation. And as with every hyped concept, there are many discussions about technology pitfalls and AI being untrustworthy. Nevertheless, it is already successfully integrated into many fields — in fact, today more than 80% of companies are either using or exploring the use of AI in their organisation worldwide.
One particular area where AI is posed to disrupt is finance. According to PwC research, assets managed by robo-advisors are expected to double in the next few years. In particular, AI will transform financial compliance, where most tasks are easily automatable. AI performs them much faster than human employees, is available 24/7, and is often more cost-effective. Let’s delve deeper.
How does AI perform in asset management compliance today?
With the high workload and demand for speed in transaction execution today, it is impossible for compliance officers to keep up and check each fund transfer or other operations. To solve this problem, financial organisations digitalize the system and create automated rules for their verification. They are designated to identify suspicious transactions like large transfers to offshore jurisdictions, transfers that do not match the client’s profile or complex schemes involving multiple companies.
Today, usage of AI elevates the efficiency of these operations. AI analyses client profiles, identifying potential risks and anomalies. It also helps automate KYC processes and monitor each transaction in real-time, assessing them more precisely. AI can automatically categorise transactions as suspicious and recommend compliance officers to handle additional due diligence.
The future integration of AI in compliance will most likely be prosperous
The leaders of finance are optimistic about future AI integration, as they already witness direct benefits from AI’s introduction. Recent research indicates that 57% of financial advisers have a positive outlook on AI’s potential impact on their work, particularly noting compliance as a key area of application.
The next significant step in the integration of AI into financial compliance could be deeper participation in decision-making processes. In the future, AI systems will be able not only to warn about dangers, but also to take autonomous actions to prevent them. In fact, these systems are already in progress. For example, AI will be capable of independently blocking suspicious transactions or requesting additional verification. This will eventually minimise the need for human intervention and allow compliance teams to focus on more strategic tasks.
Thus, the future application of AI in compliance will dramatically reduce illicit activity in the asset management industry, including insider trading, market manipulation, conflicts of interest, breaches of fiduciary duty and violations of sanctions regimes.
However, technology will inspire new ways of deception as well, which underscores the need for continuous innovation and adaptation in AI-driven compliance solutions to stay ahead of emerging threats.
AI against AI under human supervision
Nevertheless, AI enthusiasm cannot last for long without impediments from regulators due to the unknown nature of AI. Regulators will still require a live person to be responsible for system errors in the compliance processes for a long time. Here, compliance officers come to the fore — they will become experts in AI tools and be responsible for their timely implementation and updating.
As long as the results of AI’s work cannot be properly regulated, technology will not be allowed to make major decisions on its own. Therefore, the future of compliance in finance is the struggle of AI against AI under human supervision and control.
Moreover, a technically savvy compliance officer will be needed only for the first time, at the stage of integrating AI into the company. In the next 3-5 years, the technology will be so competently and accurately implemented into business processes that a simple person will be able to manage and moderate it without any tech background.
The best for AI in compliance is yet to come
Thus, for possible advancements to come to life, another direction for AI’s development in compliance is to improve the explanation of AI solutions. This means that the results obtained by AI systems should be well-explainable and have understandable algorithms so that they can meet regulatory requirements.
Despite current problems, such as AI’s underdevelopment to a sufficient extent and tightening regulations, AI integration must begin now. Changing workflows and introducing new automation tools might be challenging. Competition in this area is very high, and the world is changing so fast that you need to be ready now to get ahead of rivals who are just waiting and losing their chance.
Mikhail Dunaev, Chief AI Officer at ComplyControl, a UK company specialising in cutting-edge technology solutions for banks. Mr Dunaev is an experienced technical lead and software developer in the fintech sector. Joining the Comply Control team in 2023, he oversees Product Management, ML Engineering and the development of AI-driven features and technology stacks.
