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Artificial intelligence for regulatory compliance: Are we there yet?
Journal of Financial Compliance,
3
(1),
44-59
(2019)
Abstract
The world’s first digital computer, Electronic Numerical Integrator and Computer (ENIAC), would have turned 73 this year. Since ENIAC’s birth in 1946, we have used computers to create a digital version of our analogue world. Human intelligence (and natural stupidity) evolved for the analogue world; however, human cognitive capabilities are limited when it comes to the complexity of understanding and decision-making in the digital world. This paper explores the capability of artificial intelligence (AI) to transform the financial industry. Banks and insurance companies have effectively digitised their businesses, with financial institutions reportedly spending more than any others on data; however, they find themselves caught between the Scylla of big regulation and the Charybdis of big data, particularly where financial compliance and risk management is concerned. Supervisory authorities are equally challenged. It is no surprise, then, to discover that AI is shaping the FinTech, RegTech and SupTech landscapes, in addition to related activities in the legal and professional services sectors. In the face of unbridled enthusiasm and unquestioning acceptance of many of the claims made for AI, this paper takes a balanced, critical stance in explaining the what, why and how of AI in the financial industry, with a particular focus on the art of the possible in regulatory compliance.
Keywords: artificial intelligence (AI); regulatory compliance; digital technologies; semantic technologies; RegTech; SupTech; finance; financial regulators
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Author's Biography
Tom Butler is Professor and Principal Investigator of the Governance, Risk and Compliance (GRC) Technology Centre, University College Cork, Ireland. Tom’s research at the GRCTC focuses on the development of RegTech and RiskTech solutions for the financial and legal sector. Specifically, his research focuses on applying innovative digital technologies (based on semantic technologies, ontologies, artificial intelligence, machine learning and risk data virtualisation) to address the problems of risk management and regulatory compliance and reporting in the financial industry.
Leona O’Brien LLM, BCL, BBus, is a senior regulatory technology researcher at the Department of Business Information Systems, University College Cork. Her research interests are semantic technologies, financial regulation and RegTech/FinTech. Leona has published and presented widely, collaborated in several RegTech innovations, and has attracted over €440,000 research funding. She is a speaker and panel member at industry conferences on RegTech, digital regulatory reporting (DRR) and compliance in the financial industry.
