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How Can AI and Machine Learning Help Banks Mitigate Risk?

AI & Machine Learning

Traditionally, banks relied on transaction monitoring systems based on pre-defined binary rules that require the output to be manually checked. But with its 95% false positive rate, that technology led to teams of people chasing dead ends. By contrast, today’s machine-learning solutions use predictive rules that automatically recognize anomalies in data sets. These advanced algorithms can significantly reduce the number of false alerts by filtering out cases that were flagged incorrectly, while uncovering others missed using conventional rules.

Since the 2008 global financial crisis, the responsibilities of regulators and financial institutions have increased substantially. In addition to putting in place more robust regulations and safeguards, regulators and financial institutions have also been working overtime to ensure transparency, protect the interests of their customers and maintaining market stability.

However, unfortunately owing to budgetary, human resource and other constraints, doing all these effectively and efficiently has proved to be quite a challenge for most. Today, AI and machine learning is changing the face of global financial crime investigation and prevention.

We invited David McLaughlin, CEO of Quantaverse, to come on our AI for B2B Sales and Marketing podcast. He talked about how his company is using AI and machine learning to provide insights into data that reduce financial crime. “What AI technology does is bring in an ability not to have rules be the core of it but to have an ability to analyze vast amounts of data and find anomalies in that data that indicate risk,” he said. It’s tough work. Imagine trying to replicate human cognitive ability and then applying that engine to the complex problem of financial crimes. Still, with cryptocurrencies, blockchain, and global banking innovations, it’s not hard for Quantaverse to find new and challenging problems to solve. 

While AI and machine learning may not be the panacea for all of the compliance and risk management challenges of the financial sector, they can certainly help regulators and banking institutions in multiple aspects of their compliance and risk management undertaking.

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