Utilising Artificial Intelligence and Machine Learning for Regulatory Compliance in Financial Institutions

Abstract

This chapter explores the transformative potential of Artificial Intelligence (AI) and Machine Learning (ML) in enhancing regulatory compliance within financial institutions. Following the 2008 financial crisis, increased regulation has driven the need for advanced solutions. AI and ML, integrated into Regulatory Technology (RegTech), offer significant benefits, including improved efficiency, reduced compliance costs, and enhanced risk management. This paper examines the application of RegTech tools in processing large datasets, identifying patterns, and predicting regulatory challenges. It also addresses the challenges associated with AI and ML, such as overfitting, decision-making opacity, and legal implications. Ultimately, AI and ML are critical to the future of regulatory compliance, offering financial institutions a path to more efficient adherence to complex regulations.