The rise of big data and AI in risk and compliance: from reactive compliance to proactive oversight

It was 2023 – my first trip to picturesque San Diego. I found myself sitting at a roundtable surrounded by some of the sharpest minds in legal, risk and compliance. The topic of conversation: the future of financial services and how AI could transform things for the industry. And, crucially, what that means for compliance.

Talk of the future painted an exciting picture – automated financial advice at the click of a button, seamless product switching in real time, and a laser focus on delivering better customer outcomes. It wasn’t just innovation for innovation's sake; it was about creating smarter, faster and more customer-centric financial services.

Amid the buzz of excitement, there was a clear thread of apprehension. Understandable, really, given the room was packed with lawyers and risk and compliance professionals! While AI sparks plenty of optimism for enhancing products and customer experiences, it raises a thorny question for compliance teams: How can they feel confident about oversight when AI systems are designed to constantly learn and evolve?

For those in the ‘second line of defence’, this isn’t just a theoretical challenge. It’s about maintaining control and ensuring accountability in a world where the technology powering decisions is always changing. Trusting an ever-evolving system to stay compliant while avoiding unintended risks isn’t just daunting – it’s a whole new world for governance.

Then there’s the regulatory challenge; an area that sparks plenty of debate and one where everyone has a view! Regulators demand transparency and accountability, expecting firms to understand and explain how AI models make decisions. But could compliance teams confidently step up to the plate if a regulator—or even a customer—challenged an AI-driven outcome?

Adding to the complexity is the lack of clear regulatory guidance. Sure, existing rules and principles might apply, but can they really cover the unique risks and nuances of AI? It’s a vast, uncharted space. The conversation felt like a mix of curiosity and apprehension. Amidst the excitement, there was unease as we grappled with what AI’s rise means for governance and compliance.

As someone who’s worn many hats—lawyer, ‘Big Four’ consultant, and a seasoned player in the fintech risk and compliance world—I’ve had a front-row seat to the incredible evolution of financial services. Watching the rapid rise of big data and AI has been nothing short of transformative. These technologies represent the future of how we’ll engage with financial services and redefine the role of risk and compliance.

What excites me most is how these technologies are driving a shift from reactive compliance to proactive, predictive oversight. Imagine a world where compliance isn’t just about meeting regulations but actively preventing risks before they materialise. The journey is just beginning, and the opportunities are as limitless as the challenges we’re ready to tackle.

After stepping down as Director of Compliance at Credit Karma in the summer of 2024, I was deliberate about my next move. I wanted to join a company that didn’t just talk about innovation but actively shaped the future of financial services. That’s why I chose Bud.

What drew me in was Bud’s vision,and especially a concept our CEO, Ed, often highlights: agentic banking. It’s a bold idea centered on harnessing AI to revolutionise banking operations.

Agentic banking means using AI to autonomously transform objectives into actions, streamlining middle and back-office processes while delivering a highly personalised, premium customer experience at scale. 

This approach isn’t just about keeping up with the times. It’s about redefining what banking can and should be in an AI-driven world. That’s a mission I’m thrilled to be part of.

So, where do I fit into all of this? Well, I get to do something many risk and compliance professionals don’t often have the chance to. That is to explore how big data and AI can not only improve customer outcomes but also transform risk and compliance frameworks for the better.

Take fraud and financial crime monitoring as an example. Financial systems generate huge amounts of customer data every second. By leveraging AI and data enrichment, this information can be analysed in real time, flagging suspicious activity instantly. This means fraudulent transactions can be intercepted, losses minimised, and breaches identified more quickly – a critical advantage, especially with regulatory obligations to report breaches promptly.

It’s about harnessing the power of automation and intelligence to make compliance smarter, faster, and more resilient, ensuring we’re not just keeping up but staying ahead in a rapidly evolving landscape.

From a Consumer Duty perspective, automation has the potential to revolutionise how firms ensure positive outcomes for customers by actively aligning behaviors with the Duty's core principles.

For instance, consider a customer working toward financial goals. Automation could seamlessly transfer surplus funds from their current account to their savings account, helping them achieve their financial objectives effortlessly. 

Similarly, if a customer is at risk of slipping into an unarranged overdraft, automated systems could intervene, either by preventing the transaction or offering alternative solutions, all while adhering to the ‘avoiding foreseeable harm’ rule.

By leveraging automation, firms not only enhance customer outcomes but also demonstrate proactive compliance with the Duty’s expectations, creating a win-win for both customers and businesses.

The conclusion of that roundtable discussion was this: as lawyers and those in risk and compliance, we know that our roles are going to evolve as they have in the past. We must embrace the change because it's happening and it's here to stay. It's on us now to weave in the risk and compliance when talking about use cases. I, for one, welcome what’s to come. 

And finally, it’s worth noting that San Diego does really, really great tacos!