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You Can't Send AI To Jail — So Use it to Fight Crime. Here's How AI Is Taking Banking Compliance To the Next Level The intersection of innovation and regulation has never been more critical. Amid this wave of innovation, the need for robust regulatory compliance remains paramount.

By Max Faldin Edited by Micah Zimmerman

Key Takeaways

  • Fintech companies are continually pushing boundaries and introducing groundbreaking solutions that disrupt traditional financial markets.
  • Regardless of this, accountability must come from somewhere.

Opinions expressed by Entrepreneur contributors are their own.

In recent years, AI has emerged as a game-changer for fintech firms, reshaping the way they navigate the complex terrain of compliance. As regulatory frameworks become increasingly intricate and the consequences of non-compliance more severe, fintech companies are turning to AI-driven solutions to not only stay ahead of the regulatory curve but also to gain a competitive edge in the industry.

Let's delve deep into the transformative role of AI in the world of fintech.

Automating compliance decisions

AI in compliance holds tremendous potential and is poised to bring about a significant revolution in the field. The sheer volume of decisions involved in compliance makes it an ideal candidate for automation, and AI excels in precisely this arena. It thrives on repetitive decision-making, guided by criteria and refined through learning from previous decisions.

To harness this power, you need to provide it with sufficient data to recognize patterns
effectively. Once AI has learned from a substantial dataset, it can seamlessly take over
decisions previously made by humans, often enhancing the process after analyzing thousands of human-made decisions.

At Silverbird, we have embraced AI in various compliance processes to streamline our
operations. For instance, dealing with PDFs is a common task for businesses, but extracting data from them can be challenging due to the inconsistent formatting. To tackle this issue, we employ ChatGPT to normalize the extracted data from PDFs.

According to our co-founder, Georgy Babilashvili, using AI in compliance procedures sets digital banking apart from many traditional banks that still depend on time-consuming client requests and manual data collection processes. This approach is more precise and considerably faster, enhancing the capacity to combat financial crime while simplifying the onboarding process for legitimate clients.

As we continue to scale up the use of AI in different aspects of our operations, we find ourselves shifting more complex compliance decisions to AI's capable hands. These include critical decisions such as customer onboarding, risk scoring, transaction monitoring, flagging suspicious activities and assessing document requirements.

AI has vast potential in these areas and promises to elevate compliance to an entirely new level.

Related: How AI and Machine Learning Are Improving Fraud Detection in Fintech

Mitigating financial crime and non-compliance risks

Artificial Intelligence emerges as a formidable ally in the ongoing battle against financial crime within the banking sector. The sophisticated algorithms of AI empower banks to detect and prevent fraudulent activities with unparalleled precision and efficiency.

Machine learning models can analyze vast datasets in real-time, identifying patterns and anomalies indicative of potential financial crimes such as money laundering, fraud or unauthorized transactions. Moreover, AI systems continuously evolve, learning from new data and adapting to the ever-changing tactics employed by criminals.

The adaptability of AI systems allows for a more proactive and adaptive defense strategy. Instead of relying solely on pre-defined rules, AI systems can dynamically adjust their strategies based on the evolving threat landscape. This makes them more resilient to unforeseen and sophisticated attacks.

This approach allows banks to stay one step ahead, mitigating risks and safeguarding the financial system's integrity. AI not only enhances the speed and accuracy of threat detection but also reduces false positives, enabling banks to allocate resources more effectively. As financial crimes become increasingly sophisticated, the integration of AI in banking fortifies defenses and underscores a commitment to ensuring the security and trustworthiness of financial institutions.

What's more, AI is a powerful tool in mitigating non-compliance risks for businesses, providing a proactive means of addressing risks before they escalate. AI's ability to continuously learn and adapt to evolving regulatory landscapes ensures that businesses stay ahead of compliance requirements. Automated monitoring and reporting further streamline the compliance process, reducing the likelihood of human errors and facilitating quick response to emerging risks.

By integrating AI into compliance frameworks, organizations not only enhance their risk management strategies but also foster a culture of adherence to regulatory standards, building trust and resilience in the face of an ever-changing business environment.

Related: Rising AI Threat Sounds Like Your Loved One on the Phone — But It's Not Really Them

How can we ensure the safe usage of AI?

We still require human involvement to ensure the safety of AI when used in compliance. It's essential to recognize that human beings will always play a vital role in compliance, as it's impossible to eliminate them from the equation.

But why is that the case? Well, because AI can't be held legally accountable – you can't send AI to jail. Therefore, there needs to be a human being who assumes ultimate responsibility for compliance decisions, even if AI primarily makes those decisions.

Compliance fundamentally revolves around accountability. So, while AI can handle many linear decisions, a human presence in some capacity, whether through oversight or signing off, remains crucial.

In a broader sense, AI reduces risk and isn't limited to the realm of compliance alone. It has the potential to make a significant impact in various areas beyond compliance as well.

The future of AI in compliance

In fintech, AI stands as a transformative force, poised to revolutionize every facet of the compliance process. It is driving the industry into a new era of enhanced efficiency and effectiveness.

What does the future hold for AI?

The integration of natural language processing in AI is poised to revolutionize compliance reporting and documentation. AI-driven systems will likely interpret and understand complex regulatory language, ensuring accurate and timely reporting while minimizing the risk of human error.

The future may also witness increased collaboration between AI technologies and human
experts, creating a symbiotic relationship where AI supports decision-making processes, offers insights and handles routine tasks, allowing human professionals to focus on strategic and nuanced aspects of compliance management.

As regulatory landscapes evolve, the continuous refinement and sophistication of AI applications in compliance are expected to become indispensable for organizations navigating the complexities of a dynamic and stringent regulatory environment. While it is true that we cannot send AI to jail for critical errors, we can master it and make the best possible use of it, making it our indispensable assistant.

Max Faldin

Entrepreneur Leadership Network® Contributor

Founder and CEO of Silverbird

Founder and CEO of Silverbird

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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