Data Analytics Helps Financial Firms Manage Compliance

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In today’s global marketplace, banks are under increasing pressure to keep up with constantly shifting regulatory requirements. However, despite hiring thousands and thousands of risk and compliance personnel, financial services firms just can’t seem to keep their heads above water as they are being hit with additional waves of new regulations.

To help compliance officers better manage these ever-changing regulations, banks are turning to artificial intelligence (AI).

Lavastorm’s VP of Financial Services, Dan Donovan, was quoted in the Wall Street Journal article focusing on how data analytics processes and AI can help solve regulatory compliance problems by:

  • Bringing IT and Business together unlike traditional systems and tools
  • Being agile lets organizations adapt to changes to internal and external rules
  • Automation can improve transparency and maintain better oversight
  • Agile Analytics bringing complete traceability from the results back to the data analytics source faster and more accurate

“Whether it’s being used to help with anti-money laundering programs, know-your-customer checks, sanctions list monitoring, billing fraud oversight or other general compliance functions, proponents say artificial intelligence can improve efficiency, weed out false-positive results, cut costs and make better use of workers’ time and company resources,” says Ben DiPietro, the author of the article.

Dan Donovan says data analytics processes help bridge the gap between an organization’s technology people and business people and AI can help eliminate project bottlenecks.

A more agile process will decrease the need to use the traditional “waterfall approach,” i.e., business people document the regulatory requirements and then hand everything off to a “disconnected tech team to develop some functionality toward those requirements that they may not understand,” according to Donovan.

“So when they are looking at a result that might end up in a regulatory report or financial statement, they have complete traceability back to the source system . . . instead of everybody having their own stuff,” he says.

As well as being faster and more accurate, artificial intelligence will most likely make compliance easier, Donovan notes in the WSJ article. That means banks will spend much less time and effort on comprehensive capital analysis and review stress tests, and they won’t have to duplicate the work every reporting period.

“This approach makes that easier than just having separate analyses and silos that have to unroll and then roll back up to have a conversation with regulators,” Donovan says.

While the focus for artificial intelligence is currently on the financial sector, Donovan says AI can also be used in such areas as telecommunications and pharmaceuticals.

“There is nothing industry-specific about the way we think about these things,” he says.


*Quote cited from the Wall Street Journal, Ben DiPietro