Will 2019 be the year that AI really has an impact on regulatory compliance?

We’ve written previously about the potential of Artificial Intelligence (AI) to transform compliance. The power of AI to process, manage and analyse large volumes of data, accurately, quickly and efficiently means that is very suited to certain elements of compliance.

GDPR is a perfect example. It requires huge volumes of data to be checked for compliance and using an AI-based automated tool makes a great deal of sense. But generally GRC teams have been mostly resistant to the use of AI in compliance.

What is behind this slow adoption and could 2019 be the year that AI truly has an impact on regulatory compliance?

For all the advances in AI over the past decade, and for all the ways in which it has the potential to transform modern business, it is yet to be used much for compliance beyond a few early adopters.

This is despite the fact that compliance teams, and wider GRC departments, could benefit hugely from the computing power provided by AI. Much of compliance involves manually wading through large volumes of data, a task that is time-consuming and inefficient when carried out by human beings.

Using AI for such a purpose makes complete sense – it is essentially a technology that can store and process such large volumes of data and it is highly effective at identifying patterns and trends within data.

This evolution in the use of AI has coincided with major changes in regulatory compliance, particularly in Financial Services (FS). After the financial crisis of 2008 there were significant increases in compliance requirements for FS firms. This extra demand meant that more compliance professionals were needed to tackle the growing regulatory burden, yet for compliance teams, AI remain mostly unused.

GRC and slow tech adoption

GRC departments do not have a strong track record with adopting the latest technologies to make their lives and roles easier. There is a tendency to err on the side of caution and to stick with tried and trusted approaches to ensuring compliance.

However, these methods are far less effective in the modern business world than they once were. Demonstrating compliance is more important than ever, with greater repercussions for non-compliance, and there is more regulation than ever to be compliant with.

Organisations working with inefficient tools to tackle what is an increasingly complex regulatory landscape is something we have touched on before, yet businesses using Microsoft Excel to manage international compliance requirements is still something we are seeing.

Modern compliance requirements need a modern approach to manage them effectively and AI can play a hugely significant role in this.

AI in modern GRC

The past six months have seen a number of AI-based projects that show clearly the industry’s increasing acceptance of AI for GRC and compliance. One of the stand-out projects is one driven by the Financial Conduct Authority (FCA) in the UK.

The FCA has long been recognised as a pioneer in its use of regulatory technology. In July 2018 it partnered with the Bank of England on a Digital Regulatory Reporting (DRR) project. This is a pilot project that seeks to evaluate the benefits of machine-readable reporting, and to look at how technology can make it easier for FS firms to meet regulatory requirements.

Part of the project has involved the FCA looking at how a regulatory machine-readable framework can work with a standardised language, an interesting way of deploying AI to make compliance more efficient and effective. The pilot has already been judged a success and the FCA plans to extend the project later in 2019, broadening the use of this technology to a greater range of regulations.

AI = the future of compliance

For such an influential regulator as the FCA to work on such an important AI project demonstrates that the broader industry is now more than ready for AI. Compliance is evolving at such a pace that it is hard to predict with real accuracy exactly what the future will look like.

But it’s increasingly clear that AI will play an important part in it. The computing power and ability to manage and process large volumes of data, in combination with its automation of certain tasks and processes mean that AI is a compelling technology for GRC functions.

What’s important to remember however, is that such technologies work best when augmented by human intelligence and we aren’t at a stage when compliance professionals will be replaced. Humans should always remain at the top level of compliance, supported by AI and automation technologies, not supplanted by them.

For details of how Oxial’s own automated technology is helping compliance teams all over the world to do their jobs more efficiently, look at some of our case studies here.