AI-Augmented Compliance: A Three-Part Exploration - Part 3: AI Compliance "Experts"

Introduction

In the previous articles, Part 1: https://bit.ly/AI-Cmplnce-Part1 and Part 2: https://bit.ly/AI-Cmplnce-Part2, we explored how AI can evaluate existing policies against current legislation and assist in aligning with new regulations. In this final instalment, we'll examine another powerful application of AI in compliance: creating AI compliance experts to support staff queries.

As organisations grapple with increasingly complex regulatory environments, the demand for compliance expertise grows. This heightened demand underscores the need for efficient, accessible compliance guidance.

Use Case 3: AI Compliance "Experts"

AI can be leveraged to create chatbots or virtual assistants trained on relevant legislation, serving as the first line of support for staff compliance queries. This approach can significantly reduce the workload on compliance professionals, allowing them to focus on more complex issues. Here's how this process typically works:

1. Data ingestion: Relevant legislation, internal policies, and compliance guidelines are fed into the AI system. This forms the knowledge base for the AI expert.
2. Training: The AI is trained on this data, learning to understand and interpret compliance-related questions and provide accurate responses based on its knowledge base.
3. User-friendly interface: The AI Expert is equipped with an intuitive, easy-to-use interface that allows staff to ask questions in everyday language, making it accessible for employees across the organisation.
4. Continuous learning: The system is regularly updated with new regulations and policies, ensuring its knowledge remains current.
5. Human oversight: While the AI handles routine queries, complex issues are escalated to human compliance experts for review and resolution.

A Practical Example - Financial Services Compliance Chatbot

Let's consider a practical example in the context of a large bank implementing an AI compliance expert:

Data ingestion: The bank feeds the AI system with relevant financial regulations (e.g., Basel III, MiFID II), internal compliance policies, and industry best practices.        

Training: The AI is trained to understand and respond to common compliance queries related to trading limits, client onboarding, anti-money laundering (AML) procedures, and more.        

User-friendly interface: The chatbot is designed with an intuitive interface that allows employees to ask questions in everyday language, such as "What are the KYC requirements for a new corporate client?" (Custom GPTs by OpenAI provide similar functionality)        

Continuous learning: The system is updated regularly with new regulations and policy changes, such as updates to AML guidelines or changes in reporting requirements.        

Human oversight: While the AI handles routine queries like explaining standard procedures or defining regulatory terms, complex issues such as interpreting new regulations for specific scenarios are escalated to the compliance team.        

In practice, a trader might ask the chatbot, "What's the current limit for FX trades with counterparty X?" The AI would quickly provide the answer based on current policies and counterparty risk assessments, freeing up compliance officers to focus on more strategic tasks.

Insights for Boards and Senior Leadership

1.???? Resource Optimisation: AI compliance "experts" can act as 1st line support and handle up to 80% of routine compliance queries, allowing human experts to focus on complex issues and strategic planning. This can lead to significant cost savings and improved efficiency in compliance operations.

2.???? Consistency and Accuracy: AI-powered systems ensure consistent application of compliance policies across the organisation, reducing the risk of human error and potential regulatory breaches.

3.???? Data-Driven Decision Making: The queries handled by AI compliance experts can provide valuable insights into common compliance challenges staff face. This data can inform training programs, policy updates, and risk management strategies.

Conclusion

By leveraging AI in these ways, organisations can create a more robust, efficient, and responsive compliance function. AI compliance experts can significantly reduce the burden on human compliance officers, allowing them to focus on more complex, strategic tasks. This not only improves the overall efficiency of the compliance department but also enhances the organisation's ability to navigate the increasingly complex regulatory landscape.

As regulatory complexities continue to grow, integrating AI into compliance processes will likely become an advantage and necessary for maintaining regulatory alignment and operational efficiency. However, it's important to note that AI should be seen as a complement to human expertise rather than a replacement. The most effective compliance functions will strike the right balance between AI efficiency and human judgment.

We have developed our Shaping Success with AI? (SS:ai?) framework to help Boards and senior leadership understand, introduce, and govern AI in their organisations. SS:ai? aims to help Boards move from Learner or User to Trailblazer and lead profoundly impactful organisations.

If you're a Board Director introducing AI into your organisation, don't hesitate to contact me for an exploratory discussion. You can send me a direct message here or book a 15-minute confidential session directly at https://bit.ly/ai-15min.

References:

https://secureframe.com/blog/compliance-statistics