AI in compliance: separating hype from reality

AI is not a universal solution for compliance issues

In the past decade, artificial intelligence has been hailed at every opportunity as the solution to save the financial industry time, money and resources. At Harmoney, we’ve been leveraging AI within our compliance platform for several years, gaining valuable insights into its evolution as a strategic tool for enhanced compliance.

Rather than seeing AI as a standalone solution, we view it as a powerful booster for efficiency. It offers innovative methods for tasks like document and transaction screening, particularly when addressing adaptive threats such as terrorists and money launderers.

Here’s how we see AI making a difference in practice:

1. AI for efficiency. AI plays a crucial role in streamlining time-consuming processes by automating and accelerating tasks that traditionally require manual effort. For example, AI can identify fraudulent IDs and detect fake documents with remarkable accuracy, reducing human error and speeding up verification processes.
2. AI for Effectiveness. AI further enhances decision-making by prioritizing tasks and bringing the most critical issues to the forefront. For example, AI can flag a transaction initially classified as low-risk as high-risk when new information becomes available, ensuring potential threats are addressed promptly. Additionally, AI can identify and prioritize backlog tasks with significant revenue impact, automatically moving them to the top of the queue. This way, AI ensures that the most critical tasks are tackled first, enabling a more effective allocation of resources.
3. AI for adaptability. AI also provides the ability to continuously learn and improve, making systems adaptive. Through intelligent recommendations, AI can help optimize rules, policies, thresholds, and configurations. The system offers suggestions to further refine settings, ensuring they align better with current needs and regulatory changes.

It’s essential to approach AI adoption with care and precision. Poorly calibrated algorithms can result in an increase in false positives or negatives, which can undermine both operational efficiency and compliance objectives. By taking a strategic approach to AI implementation, organizations can unlock its potential to streamline processes while avoiding unnecessary complexities and ensuring reliable outcomes.

AI in compliance lacks transparency

When businesses rush to embrace AI for regulatory compliance without thoroughly evaluating their tools and platforms or developing a comprehensive strategy, they can run into several problems. While AI has great potential to streamline manual tasks and tedious compliance processes, hasty implementation often brings unintended consequences.

• One major issue is the lack of transparency, which can be particularly risky in the highly regulated financial sector. When deep learning algorithms operate like a black box, it's hard to verify how decisions are made. AI models without explainability are simply unacceptable in compliance.
• AI can also carry biases – often due to flawed input data or algorithmic errors –, leading to situations where it becomes impossible to explain why a certain person or company was flagged. This can not only be inefficient, but also in violation of national and EU regulations like the AI act.
• AI systems use large volumes of data, which raises concerns about data privacy and security. Ensuring that AI adheres to data protection regulations is a significant challenge.

Smart AI decision-making: how we use AI in compliance at Harmoney

We’ve been using AI for years on our compliance platform, integrating it into our different modules that each serve their purpose in a financial institution’s highly individualised combination of compliance needs. This modular approach lets us deliver tailored, proven AI-backed features that provide tangible business benefits for specific tasks. These features are easy to monitor and adjust, without the need for expensive additional training of AI models on our corporate clients’ data sets.

Take our document validation and fraud detection module, for example, which uses AI-driven pattern recognition. This makes it easy to identify fraudulent paperwork uploaded by the end clients of our partner institutions. In addition, our AI also reduces false positives, which eases the burden on compliance teams. This allows them to dedicate more time to cases that require deeper investigation.

Human feedback for continuous AI improvement

Our overall approach as a leading compliance specialist is straightforward: we implement transparent, traceable AI-based validation at every step of our clients' workflows where it adds clear value. At the same time, our hybrid model incorporates manual checks and balances, keeping our clients’ compliance analysts and KYC agents informed at all times. This allows them to provide real-time feedback and data validation, which in turn helps to further refine the AI model. Our risk models and due diligence parameters are fully embedded and customisable to meet each client’s specific needs, creating the perfect balance between a financial institution’s own policy framework, AI algorithms and human expertise.

By partnering and integrating with experts like SymphonyAI’s NetReveal or Discai for transaction monitoring, who share our commitment to combine rule-based vetting with AI, we deliver controlled, transparent AI. This gives our clients and their teams full peace of mind when it comes to all things compliance.

Harmoney offers a cutting-edge digital platform that streamlines intricate onboarding and compliance procedures, featuring automated screening functionalities. Interested in discovering more about our innovative solution? Reach out to us for further details!