by  Elena Matova
Financial ServicesGenerative AI

Augment Your Compliance Team, Mitigate Risks, and Save Money With Gen AI

clock-icon-white  7 min read

Financial institutions face a major challenge in launching new products quickly while staying compliant. With $4.8 billion in Consumer Financial Protection Bureau (CFPB) civil penalties as of May 2024, the stakes are higher than ever.

Your compliance team is an important line of defense for all aspects of your business. Its role is to provide oversight, guidance, and monitoring of the organization’s front-line operations and risk management activities. However, as regulations change and the demand for new products and their marketing grows, compliance teams face a higher volume of content review requests, causing staffing shortages.

In this series of articles, we’ll share how technologies such as artificial intelligence (AI) and Generative AI (Gen AI) fortify the first and second line of defense, significantly reducing compliance risk.

FDIC's new standards

In October 2023, the Federal Deposit Insurance Corporation (FDIC) proposed new standards for corporate governance and risk management, urging businesses to adopt the three lines of defense (3LOD) risk management strategy. This move highlights the regulators' view that businesses should act as the first line of defense.

  1. First line of defense: The business
  2. Second line of defense: Risk management and compliance
  3. Third line of defense: Internal audit
The first line of defense includes business units, departments, and individuals who directly manage and execute risk-related processes and activities. This area holds untapped potential for strengthening compliance.

Integrate Gen AI solutions into workflows

Integrate AI solutions into workflows
Leaders are using technology to ease the burden of new regulations and dynamic business development put on compliance teams. And because of its high market interest and impact, Gen AI is often at the top of their list. Gen AI in compliance is expected to be among the use cases with the highest market interest and use-case impact in the industry. Leaders should tread carefully because even though Gen AI does offer transformative potential, it’s not perfect for every situation.

A virtual compliance officer

While business lines need to follow the policies and procedures set by compliance teams, they also generate a growing amount of content, such as product descriptions, marketing materials, call center scripts, and blog posts. Compliance teams must review all this new content before deployment.

This process often requires lengthy reviews, frequent revisions, and follow-ups with compliance. Weaving Gen AI technology into existing compliance processes and providing extra support can help overcome these challenges. A virtual compliance officer:

Quick responses and support

Offers quick responses and support for teams working on requirements and content.

Instant, real-time guidance

Delivers instant, real-time guidance on daily operational tasks and regulatory questions.

Simplifies compliance handling for product

Simplifies compliance handling for product and design teams, which means fewer questions and changes to documents.

Provides well-structured documents

Provides well-structured documents for easier navigation and review.

Picture a new process

A virtual compliance officer lets content creators easily create and submit documents for review, streamlining the process by cutting down on rejections and revisions. Once the compliance team does a first check, the document moves to approval, and the content gets classified as needed.

Here’s how it works:

  1. Embeds compliance navigation in document creation tools, such as Microsoft Word.
  2. Auto generates compliant documents based on corporate templates and regulations.
  3. Provides query-based guidance and summarized updates.
  4. Generates tags to link and track internal documents.

Mitigate risks

Mitigate risks

Gen AI sometimes introduces novel risks, including issues with fairness, intellectual property violations, privacy concerns, and performance risks, making it problematic for compliance teams.

However, in this application, safety is ensured without compromising speed thanks to human oversight, guardrails, and monitoring systems.

Build a culture of compliance

Fostering collaboration and communication between business units — the first line of defense — and compliance teams is crucial. Adding a support agent across the board ensures a cohesive risk management approach, with each line supporting the others yet remaining independent.

A collaborative approach treats compliance as a multi-tiered discipline with various stakeholders involved. It simplifies things by being transparent, providing access, and making complex regulations easier to understand and follow.

Successful companies need a strong compliance culture, supported by leadership. This culture relies on people and processes. Weaving AI in a compliance framework, through people, technology, and processes at all levels, especially among content-creating teams like product and marketing, is where AI can really be of value.

Benefits

Integrating Gen AI as virtual compliance officers to strengthen the first line of defense (content creators, product teams, and more) can:

Cut costs and increase efficiency

Cut costs and increase efficiency

Speed up product innovation

Speed up product innovation

Improve internal processes

Improve internal processes

Facilitate smarter decisions

Facilitate smarter decisions

Provide a competitive advantage

Provide a competitive advantage

In conclusion, strengthening your first line of defense and supporting collaboration between business and compliance teams with embedded technology that doesn't add extra complexity (there shouldn't be any trade-off when it comes to technology) greatly improves risk management.

Choose the right technology

Choose the right technology

With so many technologies, methods, and promises available, it's easy to feel overwhelmed. Gen AI stands out with its unparalleled abilities, but can it meet all complex needs on its own? Finding the right tech partner is key to answering this question.

SoftServe stands out by defining problems and setting business goals from the start. Sometimes the best solution is Gen AI, sometimes it’s traditional AI, or sometimes other established technologies. This approach helps us create solutions that are effective and efficient.

Ready to bolster your second line of defense — risk management and compliance — with Gen AI technologies? Your team will stay ahead of regulatory changes and make proactive, informed decisions.