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Risk, Compliance Professionals Want AI, Barriers Create Problems – Study

Tom Burroughes

2 November 2023

Risk and compliance decision-makers in firms around the world want to adopt AI but they face poor internal data quality, lack of clarity about regulations and a dearth of expertise, a survey from Moody’s Analytics has found.

In its study of more than 550 people in 67 countries, it shows that the top three areas where AI is being applied are data analysis and interpretation , risk management , and fraud detection .

The study came out shortly after US President Joe Biden issued an executive order on how his administration intends to police AI. In the UK this week, prominent figures from around the world, including business tycoon Elon Musk, joined UK Prime Minister Rishi Sunak and others to discuss how AI should be regulated. Policymakers are trying to balance control of the tech from potential “Frankenstein” scenarios against the benefits of efficiency and productivity in a time of aging populations.

In other findings, the Moody’s Analytics report said that 83 per cent of all surveyed respondents expect that there will be widespread adoption of AI in risk and compliance in the next one to five years. However, the study found that only 14 per cent of respondents said their own data was of high quality. 

“There is a clear data maturity gap, with 75 per cent who are not contemplating the adoption of AI considering their data quality to be poor,” the study said. 

On regulation, 79 per cent of professionals think that new legislation to regulate the use of AI in compliance is important, while 66 per cent seek greater clarity on any existing AI-related regulations in risk and compliance.

People/institutions are extremely cautious in this area. Only 28 per cent are positive about these models; 25 per cent actively discourage or prohibit their use and 46 per cent haven’t yet adopted a large language model policy. Just 41 per cent associate LLM terminology with risk and compliance.

Use case understanding: Only a quarter rated their overall understanding of AI’s relevance to risk management and compliance as high. Compliance professionals are most likely to identify improved efficiency in processes , increased speed of data processing and analysis , and cost savings due to automation or improved decision-making . Fewer currently recognise the potential for more advanced, transformative benefits, such as more accurate results and predictions and the reduction of false positives .

Nine out of 10 early AI adopters report that AI is having a positive impact on risk and compliance, the report said.  Almost 70 per cent of respondents think that AI will have a transformative or major impact on their work. 

“Compliance professionals are convinced that AI will be transformative for their industry, but obstacles remain that could hinder risk management and compliance functions from capitalizing on its potential,” Keith Berry, general manager, Know Your Customer Solutions, Moody’s Analytics, said.

“With many of the professionals we spoke to expecting the widespread adoption of AI in the next one to five years, steps need to be taken for it to meet its transformative potential across risk management and compliance,” Berry said. “For example, when based on high quality data, AI is able to drastically reduce the number of false positives in a KYC screening process at scale, and can result in up to 80 per cent of level one investigation and triage happening instantly and accurately.”