AI ROUND-UP IBS Journal December 2017 37


Compliance and analytics – a starting point for AI


IBM’s Watson is one of the most relevant AI systems at the moment. Marc Andrews gives us an insider’s view on how the company sees the current landscape for the development of this technology as companies start embracing it


Junior Reporter Henry Vilar


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year ago, financial institutions started to realise that Artificial Intelligence (AI) should have applicability in their space but didn’t fully understand the use cases or the potential implications to their business. Looking back, we needed the view of an expert on the field of AI, so we reached out to IBM’s Vice President of Watson Financial Services Solutions, Marc Andrews, to ask him about how he saw the past year.


Andrews remarks on how little companies new about the uses of AI. Because of the unknown, we saw a lot of trepidation from these financial institutions: how will we get real value from AI? which activities can AI be applied to, and will it replace jobs? will AI be a black box that drives decisions which can’t be explained? will using AI allow us to adequately meet regulatory requirements?


He says: “Today, we have a much better understanding of where and how AI can be applied in financial services, but we’ve moved into a “show me” phase – now that businesses have an idea about where it can be applied, they want to see how it will impact different aspects of their business and have proof of the value it will provide.”Technology is key, but the regulatory change is equally changing the landscape. With PSD2 due to go live in January 2018, Mastercard sees its existing, and potential, customers starting to position themselves for this change. Not only the incumbents but also Fintechs are trying to capitalise on the benefits coming from this disruptive innovation.


Andrews points out how the FSB noted in their recent report on AI and machine learning, that the increased adoption we’re seeing has been driven by several supply factors, including advances in tech, the availability of data and infrastructure and by demand factors, such as profitability, competition, and the demands of financial regulation.


The relevance of Watson when it comes to the impact of AI cannot be understated. It’s been, in a way, marking the beat of most of the other AI systems out there. Andrews highlights what’s made it so relevant in the past few months: “One of the biggest milestones for Watson and AI was the launch of solutions for regulatory compliance and financial crimes, where we’ve begun applying AI capabilities to real business solutions.”


“These solutions are designed to help financial institutions


understand constantly changing regulatory requirements, delivering increased insight into potential financial crimes, and addressing the need for a more granular understanding of financial risk with a new architectural approach for data”, he says. “Watson is being trained on regulatory citations to help financial institutions navigate an increasingly complex regulatory environment. In addition, known patterns of money laundering and employee misconduct are being fed into Watson so it can be used for AML and conduct surveillance.”


Andrews: We should get past the ‘show me’ stage of AI during 2018


IBM has been applying its voice surveillance technology to discern trader conversations, enabling use of call recordings for proactive identification of potential misconduct as opposed to use for after- the-fact investigations. In another instance, the time it takes to complete some of the key tasks required for KYC due diligence has been reduced from over 13 minutes to just over 5 minutes.


In the coming year, we should expect financial services to get past the ‘show me’ stage of AI. Instead, we’ll move to real implementations that will transform day-to-day business processes. We’ll also start to see AI sitting at the core of these processes. For example, the initial application of AI for AML has been to enhance existing transaction monitoring systems. In the future, expect AI to move to the core of these processes which will enable them to drive step changes to effectiveness and efficiency.


Along those same lines, IBM’s strategy for the year to come is to focus on the acceleration of existing processes in financial services through the use of AI technology. “We will continue to apply Watson to industry-specific problems such as money laundering, managing conduct surveillance, and managing regulatory change in order to ensure that FIs stay competitive, manage an always changing regulatory environment, and respond to market change quickly.”


www.ibsintelligence.com


Marc Andrews


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