HSBC is incorporating Ayasdi’s technology to tackle money laundering. By using artificial intelligence (AI), the bank aims to save costs in efficient and automated data analysis which will reorganize its compliance efforts.
Regtech has seen significant collaboration recently. The technology can help financial institutions stay compliant with regulations and avoid fines in areas such as AML (anti money laundering) and KYC (Know Your Client).
Many banks are now using AI and automation to save costs and time on cumbersome and manual processes ranging from compliance checks to customer service. At the same time, they have been working more closely with regtech companies and reducing the amount of technology that they build in-house.
Recently, HSBC partnered with Ayasdi (an AI startup) to automate some of its compliance processes in order to become more efficient. The bank is implementing Ayasdi’s AI technology to automate its anti-money laundering investigations, which were traditionally conducted by individuals. According to research conducted by Ayasdi, the majority of anti-money laundering investigations conducted by banks are unable to detect unusual activity, resulting in a waste of time and resources.
AI technology excels in tasks that human beings are not typically good at, such as high-frequency, high-volume analysis of data. Therefore the use of AI will increase the likelihood that compliance efforts are successful. Additionally, adding AI into the mix could automate the process significantly, allowing HSBC to put its human workforce to better use and operate in a more efficient manner.
In a 12-week pilot carried out by HSBC, Ayasdi’s AI technology was able to achieve a 20% reduction in false positives while maintaining the same number of reports of suspicious activity for human review. Going forward, Ayasdi and HSBC are looking to evolve the success of the pilot, which could save the bank millions of dollars per year.
Many banks these days are eyeing their bottom lines while seeking to boost their compliance efforts. The partnership between HSBC and Ayasdi demonstrates one strategy within regtech where banks are seeking to adopt existing technologies rather than build them in-house.
By Resham Karira, Retail Banking Analyst