International Business Machines formally unveiled a Watson product which will be used in financial regulation. The product will assist financial institutions in ensuring compliance and detection of possible financial crimes using artificial intelligence tools.
IBM’s foray in the regulatory-compliance segment which is already populated by rivals using artificial intelligence tools in the management of vast data amounts, follows the tech giant’s acquisition of Promontory Group, a financial consultancy firm, back in September last year.
Building on success
With the entry into the regulatory-compliance space, IBM is looking to reap from the successes of Watson in the healthcare industry where the tech giant has not only partnered with but also acquired healthcare providers with a view to improving care especially in patients suffering from cancer.
“We were very convinced after our experience in health care that it wasn’t a technology-alone solution. You need to partner with experts who know the process, who have the expertise,” said Watson Financial Services general manager, Alistair Rennie, in an interview with the Wall Street Journal.
Regulatory text analysis
Some of the Watson tools that were launched includes one that conducts an analysis of regulatory text with a view to identifying the obligations that firms might be required to meet and assist in assessing whether the compliance programs of the firm are enough to ensure the rules are abided by. Another one helps financial institutions to detect suspicious transactions or customers while another one aims to ensure that the ‘big data’ which financial institutions possess is more accessible to senior executives and other decision makers when new business strategies are being developed.
Other tech companies that offer similar services includes Digital Reasoning which is based in Nashville, Tennessee. The startup has a deal with Nasdaq where it is supposed to monitor global trading. Digital Reasoning also partners with Goldman Sachs with a view to preventing traders from engaging in financial misconduct. Some of the firms which have invested in Digital Reasoning include JPMorgan, Credit Suisse and Goldman Sachs among others.
Efforts to comply with regulations costs banks and other financial institutions huge sums of money. A study conducted by international consulting firm McKinsey states that between 10% and 15% of operational spending budgets is dedicated to the management of risk and compliance by banks. The combined amount spent by major banks in this area alone is about $270 billion annually and the amount is expected to increase in the future since more regulations keep being added every year.