Staying compliant in banking has always required a delicate balance, and this challenge is becoming even more pronounced recently. With escalating expenses and stricter rules, businesses now face minimal tolerance for mistakes. This situation is notably acute in the UK, where financial institutions are encountering substantial scrutiny.
New findings indicate that nearly 40% of financial services organizations in this area faced penalties due to compliance issues just within the previous year. Additionally, 62% of the evaluated companies report that adhering to regulatory demands has grown considerably more difficult over the past half-decade.
UK firms are now spending over £21,000 per hour fighting financial crime. In terms of annual costs, it adds up to about £38.5bn, roughly three-quarters of the UK’s defence budget. Meanwhile, smaller institutions are being hit the hardest, spending five times more of their revenue on compliance compared to larger players.
Given those figures and with regulations continually evolving—not only in the UK but globally—how can banks and fintech companies realistically stay current without exhausting their staff or depleting their resources?
Here is where artificial intelligence steps in to provide assistance.
Tackling the biggest barriers: cost, complexity and talent
To understand precisely how AI can improve matters, let’s initially examine the primary challenges banks encounter regarding compliance. These include high costs, complexity, and significant dependence on human knowledge.
Finding qualified compliance professionals isn’t just hard, it’s becoming nearly impossible for smaller firms, since most are being lured away by bigger fish that can offer better salaries. And even when the right people are in place, the regulatory landscape often changes fast enough that compliance teams are constantly on the back foot, struggling to adapt.
Artificial Intelligence provides an escape from this repetitive loop. Its most significant benefit lies in lowering the expenses associated with compliance activities via process automation. Tasks that once necessitated full teams can now be managed by AI, which automates transaction reviews, identifies unusual patterns, and maintains organized records. Consequently, the need for sizable groups of analysts and compliance officers diminishes significantly.
It goes beyond merely performing tasks quicker and with reduced expenses. Artificial intelligence has the potential to enhance the efficiency of the processes themselves. In compliance, which demands unwavering focus on intricate details, human beings can sustain this high level of attentiveness only up until errors start creeping in due to fatigue. Conversely, AI does not require breaks and its ability to concentrate isn’t constrained by biological limitations.
In addition to this, several AI firms are striving to enhance their AI systems so they can enable compliance teams to draft regulations using everyday language, eliminating the need for coding skills. Such advancements would transform processes that were once heavily reliant on IT resources into user-friendly tasks suitable even for those lacking technical expertise—similarly straightforward to interacting with ChatGPT. A conversational interface like this could revolutionize how we handle compliance issues, streamlining workflows and boosting company flexibility.
For small and medium-sized businesses facing constrained finances and a lack of personnel, this will be a significant turning point.
Turning compliance proactive
What characterizes compliance historically is its predominantly reactive nature. Typically, when something occurs—an atypical transaction, a skipped verification, or a new regulation—the team springs into action to address the issue. However, artificial intelligence is shifting this paradigm.
Using contemporary AI technologies, you can quickly sift through extensive datasets in real-time, spotting possible hazards and signs of concern long before they evolve into genuine dangers. Platforms driven by artificial intelligence for assessing risk can consider past data along with transaction histories and apply predictive analysis to anticipate compliance challenges prior to their occurrence. Rather than merely responding to issues as they arise, financial institutions can now proactively work towards averting them.
Suppose an AI system identifies a transaction pattern that matches a recognized fraud scheme. In that case, it can promptly notify a compliance officer or halt the transaction entirely, preventing any potential harm. Additionally, such AI models can track global regulatory changes, highlighting new regulations that could impact your company’s activities and assisting compliance teams in staying proactive.
This forward-thinking strategy aids not just in evading fines, but also fosters confidence among regulators, investors, and clients. In the current climate, where financial stakes are high, having the ability to declare “we anticipated this and took action promptly” can significantly bolster your standing.
Certainly, everything won’t be plain sailing moving forward. The realm of compliance remains fraught with high stakes, where mistakes could have serious consequences. An inadequately trained artificial intelligence system or insufficient human supervision might result in incorrect alerts or overlooked dangers.
This is why I believe collaboration between AI and human experts will be essential. AI can handle the heavy lifting, but experienced compliance officers are still going to be needed to interpret results and provide final judgment calls. In fact, I’d say that we are about to enter a new era of “augmented compliance,” where technology and human insight go hand-in-hand.
What’s in store for the future?
Looking ahead, artificial intelligence is poised to revamp compliance strategies, making them more efficient, adaptable, and expandable. Although many might fear this change could displace human employees, my view is quite different. The objective isn’t replacement but empowerment; providing compliance professionals with the resources required to perform their duties more effectively, swiftly, and assuredly.
Future regulatory demands are expected to become more stringent, making such support not merely beneficial but essential. Financial institutions and fintech companies that adapt to this change will be better prepared to handle growing intricacies. Conversely, those failing to do so might struggle with escalating expenses and lost chances, potentially leading to their decline.
Roman Eloshvili, the Founder of XData Group
“Proactive Compliance in 2025: How AI Is Assisting Banks Stay Ahead Amidst Regulatory Challenges” was initially developed and released by
Retail Banker International
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