Leveraging Private AI for DORA Compliance in the Banking Sector

Compliance and AI regulations (like DORA, the EU AI Act and GDPR) are increasingly being seen as holding Europe back in AI uptake and innovation. Without getting into a can of worms that has a counter-argument that these regulations can actually benefit Europe in the long run, let us look at how new legislation can shape AI in the banking sector.

DORA stands for the Digital Operational Resilience Act. Its a new piece of legislation from the European Union that aims to ensure that the financial sector in Europe can withstand, respond to, and recover from all kinds of ICT (information and communication technology) disruptions and threats. Think of it as a set of rules and regulations designed to make sure banks and other financial institutions are well-prepared for things like cyberattacks, IT failures, and other digital disruptions.

Here's a breakdown of what DORA does:

Sets standards: DORA establishes a consistent set of requirements for managing ICT risk across the EU financial sector. This means all financial entities, from banks and insurance companies to investment firms, will have to meet the same standards for digital operational resilience.

Focuses on ICT risk: DORA specifically addresses the growing risks associated with technology, requiring firms to have robust systems in place to prevent, detect, contain, recover from, and learn from ICT-related incidents.

Includes third-party providers: It also places obligations on critical ICT third-party providers that serve the financial sector, such as cloud providers and data analytics firms. This is important because many financial institutions rely heavily on these external providers.

When does DORA come into force?

Although it was officially published on 27th December 2022, DORA will apply from 17th January 2025. This means financial entities have a period to prepare for and implement the necessary changes to comply with the new requirements.

Leveraging AI under DORA

Banks would do well to leverage private AI solutions to comply with the Digital Operational Resilience Act (DORA) in the following five ways:

• Risk Assessment and Management:
• Incident Management:
• Testing and Monitoring:
• Third-Party Risk Management:
• Compliance Automation:

By implementing private AI solutions, banks can enhance their ICT risk management capabilities, improve their operational resilience, and comply with the stringent requirements of DORA. These solutions can also help banks optimise their operations, reduce costs, and improve customer service.

Specific Examples:

• Fraud Detection: AI can analyse transaction data to identify and prevent fraudulent activities, protecting banks and their customers from financial losses.
• Cybersecurity: AI can detect and respond to cyberattacks in real-time, minimising the impact of security breaches.
• Customer Onboarding: AI can automate the customer onboarding process, ensuring compliance with KYC/AML regulations.
• Regulatory Reporting: AI can automate the generation of regulatory reports, ensuring accuracy and timely submission.

Overall, private AI solutions can play a crucial role in helping banks comply with DORA and enhance their overall operational resilience. By embracing these technologies, banks can strengthen their risk management frameworks, improve their security posture, and ensure the continuity of their critical ICT services.