Football and finance: How AI will become the VAR of compliance


In a few months’ time, financial services firms must provide evidence that they are ensuring their customers are being protected from foreseeable harm. AI tools will have a crucial role in compliance.

21st Mar 2023

According to the Financial Conduct Authority (FCA), stricter requirements of consumer duty must be operational by the 31 of July. Organisations are not ready, but AI is the key.

There are two schools of thought when it comes to AI and compliance. Some people think it'll mean fewer jobs for humans, while others believe it'll create new opportunities. But it's not as simple as just swapping out a few employees for robots. It's a fundamental shift in the way we work and think.

Think back to the impact of cheap motor transport or the computer on our daily lives. These innovations changed every aspect of how we live, for better or worse. They altered our perceptions and what we thought was possible. They changed the way we lived and thought. And AI is no different.

Compliance best practice has evolved into a model called "The 3 Line Defence," where operational management, expert monitoring, and reporting, and internal audit functions are at the core of the defensive posture. AI-based experience and interaction analytics tools are changing every process in global compliance standards. These tools enable a level of oversight and consumer protection that we've never seen before.

Enter Machine Line Defence (MLD). This specially-focused enhanced AI can process and analyse every interaction in every channel, identifying behaviours, events, and contexts through the relationship. This is not just about checking every call for compliance failures. MLD checks every interaction for everything it can relentlessly and alerts to every anomaly, learning all the time about better compliance.

The tools weave together the three lines of defence in a new way, creating a new role like the Video Assistant Referee (VAR) in football. This AI-assisted supervisory capability, empowered by smart user-friendly tools, dramatically improves the focus on changing outcomes in cases of real concern rather than trying to find them like a needle in a haystack. This changes the way the three lines of defence model will operate.

Machine line defence
Morris Pentel

The cost-benefit maths is simple: you have a system that is checking in seconds what a human would check in thousands of hours. You have millions more man-hours of compliance processing going on, resulting in better protection for people. It's also making it easier for compliance teams to do their jobs and identify areas for improvement. Plus, it's way more efficient than having a bunch of humans doing the same thing. This won't be a traditional “early adopters and laggards” model. This will be compliant or not!

So, this isn't just about compliance it is about expectation. When regulators can use these tools to analyse all your interactions and prevent failures, why wouldn’t they? The importance of compliance oversight is dramatically increased. And just like VAR changed football for the better, MLD is making compliance more transparent and safer for consumers. This won't stop all unfair treatment of customers by financial institutions, but it will make it much safer for consumers. It's also making it easier for compliance teams to do their jobs and identify areas for improvement. AI-based experience and interaction analytics tools will provide an essential layer of protection for consumers and for your organisation.

In an insightful article on consumer duty on on the 13th March 2023, Adrian Boulding writes: “In just a few months’ time providers, platforms and advisory firms alike must be able to provide evidence that they are ensuring their customers are being protected from foreseeable harm.”

He also points out how the use of data change the motor industry by providing insight. But now the platforms can tell you if a customer was confused and what you did about it. That adds goal line technology.

So, embrace the change and make the most of it. Winston Churchill once said, "Soccer is a gentleman's game played by hooligans, and rugby is a hooligans' game played by gentlemen." VAR stopped football from being a hooligans' game, and AI will stop compliance from being a lucky dip. It's time to adapt to this new paradigm because this is really seatbelts in cars and not fouls at football games.

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