What if regulations were machine-readable? What if, when regulatory changes come out, financial companies wouldn’t have to download hundreds or thousands of pages of rules and read them all? What if they didn’t have to rely on lawyers -- their own, and also the legions of legal experts and consultants who translate rules for the industry as a whole, to help them understand what to do? What if, instead, they could run new rules through a machine-based review, and get all those answers automatically? For very little money?

Banks would be able to update compliance processes much more easily. Startups could easily find out what rules apply to them. The results could feed into other new, high-tech tools, to automate and streamline implementation.

A lot of people are working on this concept, both at regulatory agencies and at regtech firms. One leader in that effort is my guest today, Kayvan Alikhani, Co-founder and CEO of Compliance.ai. We both were speakers this year at the Comply 2018 conference in New York, and while we were there we found a chance to sit down and talk.

Kayvan and Compliance.ai set out to solve the problem that today’s solutions are aging, rigid, slow, and expensive. Among other things, these systems fall behind the deluge of regulations that hit the financial sector every year. Compliance.ai looked at which industry most needed its new tech and chose finance, in part, based on research findings that compliance teams spend at least 30% of their time just chasing changes.

Compliance.ai aims to automate the manual work of collecting, cleaning up, and parsing data and figuring out what is relevant to its customers, using machine-readable technology. Their software can speed up and simplify much of the work done today by traditional GRC -- governance, regulation and compliance -- systems. More basically, they are trying to redesign the whole model of importing data manually, analyzing it in spreadsheets, communicating on it via email, and all the rest.

While today’s regtech innovation is mostly point solutions for particular use cases, remember that they’re converging. Machine-readable technology will meet up with other new ways of capturing and using data, from cloud computing to blockchains, and we’ll see big breakthroughs when these connections really take.

Kayvan is especially thoughtful about artificial intelligence. AI has incredible power to save massive time and money in compliance processes. I myself have no doubt that AI and machine learning are the future of regulation and compliance. However, getting to that future is a journey, and Kayvan describes how it is likely to go, and especially steps that will be needed to surmount reluctance by both industry and regulators to adopt AI they don’t fully understand, by gradually building up understanding and trust and by assuring that AI meets the standards needed for accuracy and fairness.

Significantly, regulators themselves are working on machine-readable regulation too. In particular, the UK’s Financial Conduct Authority (FCA) is aiming to “digitize the rulebook” by tagging regulations with machine-readable markers. In the US, the Commodity Futures Trading Commission is exploring the same concept. We’ll link in the show notes to our episodes with both agencies.  

Regtech firms like to emphasize the time and money they can save the industry, which in turn sometimes leaves compliance professionals worried about robots taking their jobs. One lesson from my talk with Kayvan is that there’s a mountain of human compliance work ahead. The machines are going to do the rote tasks, and the higher math. The people, with their deep expertise in both rules and the complex systems around them, are going to be freed up to do ever-more meaningful work, better than ever before. They will be busy shaping these new tech tools, and they will be using them to tackle the work only they can do -- the deep dive analysis, the hard cases, the systemic reforms. They’ll have less frustration, less boredom, and more traction in achieving the big goals that our laws and regulations were written to further, from protecting consumers to expanding financial inclusion to catching money launderers. At my regtech firm, Hummingbird, we say our mission is to give compliance people superpowers. Compliance leaders are going to emerge as heroes in their companies as they produce better results, cut costs, cut risks, and help lead their organizations, especially banks, into the twenty-first century.

I asked Kayvan to help us envision a day in the life of a compliance professional a few years into the future. He paints a fascinating picture, and he says it’s going to be beautiful. That’s not usually a word we associate with regulation and compliance.

Links

LINK TO FULL EPISODE TRANSCRIPTION

A day in the life of a compliance officer - Part 1

A day in the life of a compliance officer - Part 2

A day in the life of a compliance officer - Part 3

Chris Woolard and Nick Cook Podcast

Podcast with Nick Cook

Podcast with Dan Gorfine, LabCFTC Chief Innovation Officer and Director

Podcast with CFTC Chairman Christopher Giancarlo

More on Kayvan Alikhani

With more than 25 years of experience in hi-tech, Kayvan leads operations, strategy, sales, and marketing for Compliance.ai. Most recently, Kayvan led the identity strategy at RSA, and represented EMC on various industry alliances such as the FIDO board. He is Co-Founder and CEO of PassBan (acquired by RSA), a company focused on mobile identity assurance. Kayvan also led strategy at LiteScape (as CTO and later as CEO), creating security and mobile identity solutions for VOIP-based networks. He was Co-Founder and CTO at BeNotified, a cloud mobile communication service provider. Prior to that, Kayvan co-founded AVIRNEX, a cloud-based enhanced fixed- and mobile-communication service provider.

More for our listeners

We have great shows coming up. We have a wonderful episode with the California Banking Commissioner, Jan Lynn Owen. We’ll also have another regtech firm, Alloy, which has high-tech solutions for meeting the Know-Your-Customer rules in AML. We have one with the co-founders of Earnup. From the global perspective, we’ll have the World Bank’s Harish Natarajan; one with Anju Padwardhan of CreditEase focused, among other things, on fintech developments in China; and one with P.J. DiGiamarino of JWG and the Regtech Council. We also have a great show in the queue with  Peter Renton of LendAcademy and the LendIt conference, one of the most thoughtful people we’ve talked with.

I’ll be speaking this fall at some great events:

• Finovate Fall, September 26, 2018, New York, NY

• NFCC Connect, October 2, 2018, Dallas, TX

• P20 Conference, October 10, Atlanta, GA

• American Banker RegTech, October 15-16, New York, NY

• Money 2020, October 21-24, Las Vegas, NV

• Singapore Fintech Festival, November 12-16, Singapore

• LendIt Europe, November 19-20, 2018, London

• ABA/ABA Financial Crimes Conference,  December 2-4, Washington, DC

• Regtech Rising, December 3-5, London

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