The AI Book

CHAPTER 43Compliance as an Outcome

By Prashant Gandhi¹

¹Principal Financial Services, ThoughtWorks

Regulators want to ensure that they are both protecting the sanctity of the financial system as well as protecting customers. Given the recent history of supervisory failures, financial crisis and systemic fraud at large scale, regulators are increasing their scrutiny and are creating more rule-based regulations to prevent further market crashes.

Heavy enforcement actions are also forcing banks to rethink their approach to compliance. Banks have often responded to regulatory obligations with tactical responses, especially after the 2008 crisis. Tactical implementations, coupled with manual processes, create complex layers that become hard to untangle. This creates a huge demand on the banks’ resources, both in terms of manpower and capital available to invest. A common trend has been to add large number of compliance professionals to the ranks every year to meet the increasing demand. In 2015, for example, JP Morgan added 13,000 resources to support regulatory and compliance efforts and spent more than $600 million in regulatory and compliance technology.

This is not a race that banks will win. Chris Skinner, a noted author and futurist, often quotes a statistic that a global bank must deal with 185 regulatory changes per day.¹ It is inevitable that banks will need to automate compliance checks and regulatory changes.

This is not a race that regulators will win, either. Andrew ...