Published in BankBeat, December 18, 2024
Artificial intelligence is becoming an increasingly vital tool for compliance teams dealing with the growing complexity of data-heavy regulations. As compliance professionals face more pressure to process massive amounts of data accurately and quickly, AI solutions are entering the spotlight. I recently had the opportunity to sit down with Lexi, a state-of-the-art, albeit fictional AI avatar designed to assist banks in managing compliance.
Our conversation delved into how AI can enhance the work of compliance professionals, improve data handling, and ensure that institutions stay ahead of regulatory demands.
Miller: Lexi, thanks for joining me today. With regulations becoming more complex, compliance officers are facing increasing amounts of data. How do you see AI playing a role in helping banks manage all this information, especially as it relates to ensuring compliance with ever-evolving rules?
Lexi: Thanks, Mark! The sheer volume of data that banks must process to stay compliant with regulations like the Community Reinvestment Act and fair lending laws can be overwhelming. AI’s role is to automate the data analysis, flag risks, and provide insights in real-time, allowing compliance teams to focus on higher-level tasks. I can review thousands of transactions in seconds, flagging anything that looks off or might be a compliance risk. I can also track changes in regulations to ensure an institution is always up to date. But what’s crucial here is that I don’t make decisions for the team — I simply bring the important information to the forefront so others can focus on interpreting and acting on it.
Miller: Great point, Lexi. Data integrity is crucial in regulatory compliance. If the data isn’t clean or well-organized, it could cause more harm than good. The regulatory environment is increasingly data-driven, and it’s not just about processing the data quickly but ensuring that the data is clean, organized, and trustworthy. How does AI ensure that the data you’re working with is reliable and accurate for these crucial compliance tasks?
Lexi: You’re absolutely right — AI can help with the volume, but without accurate data, even the best AI tools won’t be effective. My first step in any task is to assess the quality of the data. I can spot inconsistencies, flag errors, and suggest ways to clean the data before running any analysis. It’s about ensuring that the foundation is solid. AI tools like me rely on structured, clean and complete data to provide actionable insights. This is why data management and infrastructure are so important. Banks need to invest in systems that ensure their data is stored, categorized and updated properly. With good data, I can provide the compliance team with meaningful, accurate insights that drive better decision-making.
Miller: Lexi’s explanation really hit the nail on the head: Good data isn’t just a technical requirement; it’s a strategic advantage. Data integrity directly impacts the effectiveness of compliance programs, and having clean, well-organized data allows compliance officers to trust the insights provided by AI. It’s a reminder that before rushing into AI adoption, institutions need to prioritize their data management practices. That brings us to the bigger question: What would you say to a bank that’s interested in integrating AI but isn’t sure where to begin? It can feel like a big leap, especially when there’s so much focus on data and infrastructure.
Lexi: It can seem overwhelming, but the key is to start small. Banks don’t need to overhaul everything overnight. A good starting point is to identify the areas where your team spends a lot of time on repetitive, data-heavy tasks. For instance, transaction monitoring is a perfect use case for AI. You can implement AI to automate this process, allowing the team to focus on investigating flagged transactions rather than manually reviewing everything. Once you see the benefits, you can gradually expand AI’s role into other areas, like regulatory reporting or risk assessments. As for infrastructure, making sure you have the right data management practices in place is key. Ensuring your data is accurate and well-organized is the best first step to get AI working effectively.
Miller: That’s great advice. Clearly, it’s not just about speeding up processes, but ensuring that compliance professionals can work smarter, not harder. Data integrity is the foundation, and starting small allows banks to see immediate results while building toward a more advanced AI-integrated future. But the takeaway for any institution looking to adopt AI is clear: focus on the quality of your data first, and the rest will follow.
Lastly, Lexi, where do you see the future of compliance with AI heading? What does the future look like when AI and compliance teams work together?
Lexi: I see a future where AI takes on more of the data processing burden, allowing compliance professionals to focus entirely on strategy, interpretation, and decision-making. AI will continue to improve, spotting risks before they become issues, and helping banks stay ahead of regulatory changes. But at the end of the day, compliance is about human judgment. AI is just a tool to enhance that judgment, not replace it. The future is about collaboration — humans and AI working together to ensure smarter, faster and more proactive compliance programs.
Concluding thoughts
As Lexi highlighted, AI has the potential to transform compliance by managing data-heavy tasks and providing real-time insights. However, the integrity and organization of data remain the foundation of any successful AI implementation.
For banks looking to integrate AI, starting small — focusing on repetitive tasks and investing in data management — can create the foundation for a more strategic, proactive compliance function. By pairing human expertise with AI’s capabilities, the future of compliance promises to be smarter and more efficient than ever.
Mark Miller is Director of Risk & Compliance at Wolters Kluwer and can be reached at: https://www.linkedin.com/in/mark-j-miller-crcm-cerp-92a2272/
