DEREK SMITH: Combine AI with human expertise on compliance


Derek Smith

Regulatory compliance is undoubtedly a key component of trust between institutions and consumers in the financial services industry. Thus an important question facing corporate governance professionals in the era of fintech (financial technology) innovation is whether to invest in Artificial Intelligence (AI) for compliance or rely on the traditional expertise of risk and compliance professionals.

Nathan Christensen, chief executive of Mineral, and a Forbes Council member, wrote: “The technology will evolve rapidly, and by identifying the unique strengths of both humans and AI - and designing systems that bring them together - organisations can bring more value at faster speeds and lower costs to the businesses they serve.”

Against this backdrop, this article will briefly discuss the benefits and drawbacks of both AI and human expertise in the context of governance, risk and compliance, then propose a hybrid approach.

The case for AI

The power of artificial intelligence lies in its scalability, efficiency and unerring accuracy, attributes often lacking in manual processes. For example, an artificial intelligence system can sift through millions of transactions in real time to identify suspicious activity. This task is virtually impossible for a human being to accomplish within a similar timeframe. In addition, AI platforms are built to acquire new knowledge from new sets of data. Therefore, they are reported to adapt to new compliance risks much faster than humans, whose learning curve is naturally steeper and slower.

It is important to note that AI’s data analytics capabilities become even more valuable when we consider the complexity of international regulations, such as the European Union’s General Data Protection Regulation (GDPR), and local laws, such as the Financial Transactions Reporting Act (FTRA) and Commercial Entities (Substance Requirements) Bill 2023, which require granular scrutiny and interpretation. Automated compliance systems can also drastically reduce non-compliance costs, such as fines, legal fees and reputational damage.

The human element

It should be noted, however, that the role of a compliance expert is far from obsolete. Even though AI can provide quantitative analysis, it lacks the qualitative judgment from years of experience and a nuanced understanding of regulatory frameworks. The contextual perspective provided by human experts is not available to machines. Taking a particular action may not align with the business rationale or reputational implications, even if AI can flag an abnormal transaction. Moreover, AI technologies cannot address the ethical dimension of compliance, which is often grey and open to interpretation. During this time, a seasoned compliance officer is invaluable for their wisdom, ethical background and discretion.

A hybrid approach

Considering these factors, the most effective approach for corporate governance in financial services is not to choose between AI and human experts but to integrate them into a collaborative framework. It is possible to create a robust compliance strategy with a hybrid model that employs artificial intelligence to handle data-intensive tasks, and human experts to handle qualitative judgments and ethical considerations.

The initial stages of transaction monitoring, risk assessment and data analysis can be handled by AI, while compliance officers can handle the final evaluation and decision-making. This ensures that AI’s speed and accuracy complement human experts’ ethical and contextual intelligence.


In short, maintaining rigorous compliance standards requires adopting forward-looking strategies as the financial landscape continues to evolve. Combining AI capabilities with human expertise can create a robust, flexible, cost-effective compliance framework. Using this hybrid model, artificial intelligence and human expertise are not competitors but partners, enhancing the other’s capabilities to develop a new gold standard in corporate governance.

• NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years. He has held positions at a TerraLex member law firm, a Wolfsburg Group member bank and a ‘big four’ accounting firm. Mr Smith is a certified anti-money laundering specialist (CAMS), and the assistant vice-president, compliance and money laundering reporting officer (MLRO) for CG Atlantic’s family of companies (member of Coralisle Group) for The Bahamas and Turks & Caicos.


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