As with all areas of technology, the regulatory space continues to evolve and look at ways to use tech to make things more efficient.

RegTech is a general term for the use of technological applications and systems to help manage, whilst ensuring compliance with, regulatory demands and responsibility. Historically, such systems have been used to help simplify large manual tasks, particularly in relation to anti-money laundering and the detection of suspicious transactions. However, with the recent developments in AI, RegTech has started to realise and discover the enhancements it can bring to their products.

So will it be that RegTech continues to utilise the advances in AI or will AI eventually take over RegTech? Similarly firms need to consider their workforce and how AI will enhance it.

What are businesses doing about it?

The vast majority of businesses are thinking about AI, talking about AI, and researching AI to understand how it can work for them, across many areas of their business. Compliance and AML is undoubtedly a big focus within this.

For instance, BCB Group, a leader in payment services for crypto exchanges, is actively exploring ways to embed AI into its compliance framework, demonstrating a commitment to innovation while prioritising customer experience and safety.

Businesses such as BCB want AI tools to:

● Automate manual processes
● Drive efficiencies
● Improve processing times
● Unlock new potential

As an example, many processes in Anti Money Laundering (AML) & Terrorist Financing (TF) require analysing large volumes of data, identifying anomalies, and making decisions as to what should happen next. AI tools, such as those considered by forward-thinking companies, can significantly improve time and efficiency in these areas, as they can sift through larger volumes of data more quickly.

If AI tools were used for this type of work, they could allow businesses to be more agile, lean, and efficient, with less use of AML professionals' time on manual and process-oriented work. This is something BCB is keen to progress on, as it allows its AML professionals more time to concentrate on in-depth investigations, latest learning, framework development and enhancement as well as personal career focus and development.

And this isn't the only way that AI can impact compliance and AML teams; it can also help dismantle barriers by providing cost-efficient ways to help the firm's growth. For example, AI translation tools can be very powerful in assisting with communications between teams around the world, whether they are in-house or outsourced. This could mean that businesses can be more cost-effective and able to grow their global reach, without compromising on the safety or quality that can be impacted by breakdowns in communication due to language and time zone barriers.

But there is a health warning!

Whilst there are many ways in which AI can impact businesses in a positive way, as highlighted above – this should also be viewed alongside a number of concerns and warnings about AI, some of which are detailed below.

1. One of the most important factors to remember is that AI tools learn from the data which is inputted into them. If that data is inaccurate, then the tool will also be inaccurate.
2. Businesses implementing such tools would need to 'train' these systems to ensure that they are producing the correct results – and this training can take many months.
3. Regulators recognise this fact, so they want businesses to make sure AI tools are consistently quality assured and that professionals still have oversight on decisions made using information from AI tools.
4. Privacy concerns! Anyone inputting KYC/KYB information into AI that you don't host or have full control over must ensure they have strong safeguards in place to make certain they are protected against potential data breaches and so forth.
5. There are/could be AI impact on careers and jobs

Before making any decisions on whether AI is something your firm is ready to embrace alongside a skilled workforce who are able to utilise the opportunities to grow your firm, and your own career do consider the below points when wondering if and how AI might impact your firm or role:

● AI isn't going anywhere so embrace it, if you don't someone else will! Think of AI as a tool that you can use to help you work smarter.
● AI isn't always accurate, so professionals will always be required to ensure the best outcomes. This means it's important to continually develop your own skills and keep them agile and up to date.
● Keep reviewing your own skill set, your value-add, and your impact on the business, and whether this is sustainable as AI evolves. Learn about AI's value-add as well, and instead of trying to replicate it, think about how you can use it to elevate your own position.
● The importance of soft skills cannot be under-estimated so keep focusing on this. They will become even more important in the future. Keep having conversations, network, and learn from peers. In an era where home and remote working has become prevalent, it's important to retain your communication skills by ensuring you're interacting with others often.

Conclusion

 Conversations about AI and RegTech will continue, and AI will keep evolving and even enhancing RegTech. Businesses should leverage the opportunities that AI can bring whilst exercising caution and continuing to hire and retain professionals with agile skill sets, who can ensure AI is used successfully and safely.

Whilst BCB and Twenty84 agree that advancements in AI will aid in AML investigations, we believe it cannot replace the human expertise and knowledge of high quality AML and Compliance professionals; they remain as important as ever. AML and Compliance professionals can and will only benefit from learning about AI, keeping up to date with its development, and embracing its use. By doing this, they can assure their own position as well as helping their firm to thrive.

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This blog has been written in collaboration with Kym Routledge, Head of Financial Crime at BCB Group.

 Kym joined BCB in August 2022 as Head of Financial Crime, after holding the same position at an authorised UK lending platform which she left to expand her experience into DeFi. Having over 20 years experience in financial services in TradFi, including 13 years spent at HSBC group and time at BOS, as well as working for a UK FinTech, Kym is a forward thinker, who has a proven track record of assembling and managing Financial Crime teams of multiple sizes across different jurisdictions, whilst driving efficiencies and safeguarding firms against money laundering (ML) and terrorist financing (TF) threats. Kym is responsible for leading a team of Financial Crime SME's and Analysts to develop and operate the firm's ML and TF control framework.

It's Autumn 2023, and Artificial Intelligence is a high-priority topic on many business agendas across the world.

Regardless of industry or function, business leaders are trying to understand how to harness the power of AI – to use it to help improve their performance, and reduce inefficiencies.

But it's very difficult to embed AI into business process when it is still evolving so quickly; and it is crucial for leaders to ensure that there are controls in place, clarity around its use, and that it is not relied upon too heavily in functions where human interventions are still critical.

One of the most important functions, especially in Financial Services, is Compliance and Anti-Financial Crime. These teams are pivotal in ensuring that customers are kept safe, and that criminals are kept at bay. So, can AI help them do this – and is it failsafe?

AI and AML activities

We know that fraud is a billion-dollar problem across the world, and that anti-financial crime professionals often have huge amounts of data, transactions and trends to analyse, in order to detect threats and risks. This is probably one of the key areas in which AI can really impact efficiency. For example, AI systems can:

• Perform advanced transaction monitoring: AI-powered systems can analyse vast amounts of financial transaction data in real-time, identifying suspicious patterns and anomalies
• Carry out accurate customer risk assessments: AI-driven tools can assess customer risk profiles more accurately by analysing a broader range of data sources, including social media activity and online behaviour.
• Forecast: AI can forecast potential money laundering or fraud activities by analysing historical data and identifying trends

By using AI in this way, anti-financial crime professionals can reduce the amount of time spent on going through the data and finding trends; instead, they can spend more of their time on analysis, producing reports and making informed decisions about risks to the business.

AI and Compliance

Regulations are changing all the time, and one of the key responsibilities of a compliance officer is to make themselves aware of changes, adapt their firm's procedures accordingly, and provide evidence to regulators that they are complying with the rules. AI can assist them in doing this by:

• Sifting through vast amounts of 'unstructured' data such as news articles and regulatory documents to draw out key areas of change or update to laws
• Composing summaries and simplified reports which Compliance officers can use to inform their recommendations to the rest of the business

Using AI in this way will reduce a Compliance officer's time spent on reading vast documents and draw out key points quickly, enabling them to use this information to analyse the changes they need to make internally and spend more time on putting new and effective controls or policies in place.

But does AI ever get it wrong?

Accuracy in AML and compliance tasks is absolutely paramount, so it's very important for Compliance and Anti-Financial Crime leaders to understand that AI is not perfect – and does get things wrong sometimes.

AI systems rely on accuracy of data - they use this data to learn and train themselves. If the input data is incomplete, outdated, or inaccurate, it can lead to erroneous results. Coupled with this is the fact that AI systems can very quickly become out of date, especially when it comes to regulatory information where, as Compliance Professionals know, changes in regulation can happen on a regular basis.

AI systems, although they will surely improve quickly, can be inaccurate in their findings; and when it comes to AML, this can result in false positives or negatives, which could potentially add to the workload of an Anti-Financial Crime professional rather than take it away. AI systems can also 'inherit' bias, depending on the type of information they are learning from – so human oversight is crucial to ensure customers are treated fairly.

And what can't AI do?

AI is what it says on the tin – Artificial Intelligence. The speed and breadth of intelligence within AI systems will likely far outweigh that of a human; but humans possess some critical skills that AI systems don't have, at least not yet. When it comes to Compliance and Anti-Financial Crime, human professionals use the following vital skills to ensure success:

• Critical thinking and judgement; the ability to analyse information in the context of lots of other considerations, and form judgements without any bias
• Decision making; the ability to make well-informed decisions within the context of their own role and business
• Relationships; the ability to network, speak with peers, attend events and learn from these interactions
• Ethicality and Trust; humans are able to build trusting rapport with customers, which machines are much less able to do, as well as ensuring ethicality and fairness are always kept in mind

So, as a Compliance and Anti-Financial Crime professional, you may well find that you are starting to use AI systems more and more in your work – but do so with assurance that you are using it in the right way and for the right things. Compliance and Anti-Financial Crime professionals should embrace AI as it continues to develop, and acknowledge that it will become ingrained in your professional lives in a positive way; leaving you to spend more time doing what you do best.

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This blog was written in collaboration with Kash Baig, a senior compliance professional whom Twenty84 has had the pleasure of working with for many years. Kash describes himself as a sci-fi nerd who loves Star Wars/Trek and all things superheros; an avid reader who dreams of peace and harmony in a dark world – who with the time left does some compliance work! Kash began his career working in criminal law, before moving into compliance around 2010. He has since evolved in to a self-confessed compliance nerd who loves...life!