Loraine Lawson
Good day and welcome to the Buzz, a Bank Automation News podcast. I’m Deputy Editor Loraine Lawson. Recently, I spoke with Andrew Steioff, who is the senior manager technology alliances at LogicGate which specializes in governance, risk and compliance software. The company partners to offer an AI solution. So I asked sighup how artificial intelligence automates compliance. And if he could explain the business case for using AI over traditional methods, banks and financial institutions have been managing compliance and regulations for some time now, without AI, why do they need AI? Now?Andrew Steioff
Yes, really, what it comes down to is time and effort, I would say, you know, obviously, as technology advances, AI is becoming an increasingly more prevalent part of our everyday life. All over the world, right. So, really, in this particular Avenue and aspects, it’s really no different. So think about a insurance company or a bank that is a national bank, they have branches in all 50 states, you don’t only have to think about the state regulations, which can be, you know, pretty far in depth in scope, you can have 10s, to even potentially even hundreds of state regulations fall but also on a federal aspect as well. So some of these larger corporations have hundreds and hundreds of regulations that need to be, you know, in scope in terms of their compliance needs. So historically speaking, these organizations would have lawyers on staff that would sit there and manually come through pages and pages and pages of these regulations, which a lot of them are more so just definitions. And the real meat and potatoes aspect of it is may only be a few lines for each individual regulation. So where AI really comes to the forefront and helps here is it’s automatic, and be able to scan through all these various different regulations identify the key aspects that not only important to your business, but which can potentially impact you from a compliance standpoint, and highlight those, so we’re cutting out those man hours associated with actually physically looking. And then from a cost savings perspective as well, looking at, you know, the cost that you could save, and instead of having 10s to hundreds of lawyers on staff that are charging billable hours for this, being able to have this one machine learning capability and tool to be able to do this automatically for you on a recurring basis.Loraine Lawson
So could you can you give me an example of a situation that you might use that capability like, just sort of give us an idea of how it would function?Andrew Steioff
Yeah, absolutely. So I’m seeing a lot of this, recently, as our partnership with the center in particular, and other regulatory compliance companies have kind of taken off is that, you know, we have particular customers and prospects where they have a team of two or three individuals that their sole purpose, and their sole job is to come through these regulations, this is all they spend their time on. And it could be on top of also on top of their day to day job. So really, what we’re seeing is two aspects here, I mentioned the time saving is one, the two is like the human and the user error that comes with that as well. You know, you could be looking at this text for hours and hours in a day, right, and you might miss something that’s key and crucial. And that can end up Turn around and coming to bite you. Right. So really, what we are seeing is a removing that user error and that automation capability as we come to a more agile type of ecosystem in our ever changing world. Right? It’s not, you know, only doing it right, but doing it as fast as possible. And as efficient as possible, is really the main key use case here. It’s what really is going to be the beneficiary aspect of this joint solution for our customers and prospects and the industry in general. So oneLoraine Lawson
use case that I had sort of heard about, maybe you know more about it is like or have you heard any interest from financial services about using it for Libor?

Andrew Steioff
I have not actually what is Lightboard? What is the London is stands for? Ah, yes, yes, yes. So I’m not directly related to my day to day workings, but I know it is out there. And there’s similar things in the States. And then you know, of course, as the whole aspect of privacy and regulation kind of expands across the world. You know, you have various different privacy rules that can sometimes relate to this compliance aspect. Um, you know, there are exploiting Well, I haven’t heard of that particular instance. But I’m sure it is a situation where if there’s rigorous regulations involved with it, it would definitely apply there as well.

Loraine Lawson
So, one thing I wondered about the AI I know you have a partner with it in general, when people apply AI to these regulatory compliance issues. How does that work? Is it a separate system? Does it integrate with current systems that banks are already using? How does it typically work?

Andrew Steioff
So how typically works is it is a separate, but in our particular instance, it’s a separate offering. But we are more or less lockstep and can joined at the hip. And the way that works is that through our scoping, we are able to understand what regulators and regulations are important for you. So again, on a state level, federal level, where you operating your business, right, and then being able to then take those regulators be able to ship that over to our partner, our partner would then be able to scan those, and be able to collect some key informations and tidbits. And those would be called obligations. And so how that then works, instead of bringing in all that text into the logic gate platform itself, we’re able to scan those key obligations, and bring those over into the logic gate platform itself. So as a user, bank, insurance company, whoever you might be, you can sit within your logic gate UI, go to your regulatory compliance application, and seamlessly have all the obligations or more or less the areas of text that you need to review that ensure that you are in compliance with this regulation, immediately right into your, into your application itself. So again, instead of coming through pages and pages of text, you’re looking through three to 410 lines of text per regulation, where you can simply check yes or no, hey, I am I am, you know, compliant with this particular piece, I am not let’s revisit this. And then based on those that you are potentially not in compliance with, you can set up various different remediation workflows, and other actions within our solution itself to make ensure that, hey, we can change that thumbs down to a thumbs up to ensure that you are complying with these regulations moving forward as well.

Loraine Lawson
And so in a system, I’m sure you’re familiar with the market, in general, what does it cost a bank or financial institution to invest in an AI based system? And how does it give them a return on investment? You’ve talked a little bit about maybe attorney fees, are there other ways in which gives a return on investment?

Andrew Steioff
Yeah, so outside the attorney fees, I think, the human capital aspect, which is kind of one in the same, right. But a lot of times, you know, think about smaller institutions that may not have a legal team on staff, right, you’re actually having individuals that are potentially in your compliance team, on your risk team, you know, maybe even potentially like CSOs or even smaller companies that are actually doing this manually. And then instead of focusing maybe on other core aspects of the business, they are again, you know, reading through some parsing through this, so from an ROI standpoint, it’s, you know, feasible to think that someone could spend hundreds 1000s 10s of 1000s of hours depending on your regulatory body a year on this. And instead of doing that, do you have the one time fee associated with having this AI kicked off, and then not only is this a one time exercise, you can have this checked off and read with a recurring basis as well. So that way, if there’s any changes in regulations, you’re automatically alerted. So you don’t have to, again, re comb through those regulations, etc. So you’re on top of not only pre existing regulations, but also new and revised regulations as well as they come out. So it’s really going to be that human capital and man hour aspect, that’s going to be the key value driver here. And then also, the user error aspect I alluded to earlier as well. Can you really quantify a user error based upon a final regular regulation? I’m sure you can. It’s all going to be dependent on the regulation itself. But you can always can factor in as well, if there were, if there was perhaps a mistake or a misstep from a user perspective, and something was missed that fine or lawsuit, you know, carry some weight, not only from financial perspective, but also from a reputational risk standpoint, as well.

Loraine Lawson
Guess what a question I have is sort of how the AI plays into this. Is it pre trained by you in a sense, or does the bank have to train the AI models? Or how do you sort of say, I want to solve this compliance problem, and only this problem? We’re just sort of you change it and justice compliance changes? How is that function? What’s Rosebank filling in, in shaping it versus what’s available just as a sort of package solution?

Andrew Steioff
Yeah, so I would say for all of our partners, it is more or less going to be a proprietary database for each one. However, generally, what I see just speaking in broad strokes is that this is generally done on a regulation by regulation basis. So the learning in the AI is Self is trained based upon the regulation itself. So as you can imagine, there’s difference between financial regulations to healthcare regulations to insurance regulations. Right. So it is trained based upon that verbiage and the actual construction of these regulations. This actual science behind it is provided here, and I wouldn’t want to speak out of turn there. But I do know that it is trained on each one of those type of trenches, if you will, based upon the regulation body type. If you get a solution, it’s for all compliance issues, not just one. Yes, was kind of my question. Yes, Yes, it can. What we’re seeing is that generally, our partners started in specific markets and segments, but the popularity and the need is so great out there that we are having to historically speaking financial institutions, right. But now we again are seeing insurance, healthcare and other center Hey, well, this is going to be a game changer for us as well. So my our partners have adapted and assessed to be able to keep up with these trends, and be able to support these as well. So the answer your question in a very long winded way, it is very customizable, and able to solve a plethora of use cases based upon the client need is what I generally see.

Loraine Lawson
And I guess, depending on how much you can customize it, that sort of various the price some way? Correct? Is there a range on that? Or somebody? There’s smaller base might no Oh, is this in the shooting range?

Andrew Steioff
Yeah, absolutely. So generally, what we see is that price is generally dictated on the number of regulators that you want to monitor on a consistent basis, right. So it’s generally based on a per regular regular basis might be, you know, a couple grand for each regulator. But that being said, with all software, we do generally operate on economies of scale. So the more regulated regulatory bodies, you have them manage that price may go down, but we generally see somewhere in the ballpark between, you know, one to 567 grand per regulator, but then generally, that is, you know, if you have 50 or 100 regulators, that price does tend to shrink per regulatory body, if that makes sense. Sure, are there any particular clients that you would like to mention, from a client basis, you know, we do have a lot of regional banks that are using this today from a financial aspect. And we are currently exploring some in the healthcare space as well that are looking to branch out and as I mentioned, kind of explored those healthcare regulators as well. Now, I can mention my name today. But, you know, we do have a handful of customers using this. And we’re actually working on putting together some of those time savings to have a more quantifiable ROI there as well, but rave, rave reviews so far from our side.

Loraine Lawson
All right, is there anything else that you wanted to say that maybe I didn’t ask about?

Andrew Steioff
Um, I would just say that, you know, this is really cutting edge technology in the way that organizations are approaching right? compliance. That’s, you know, with anything, as times evolve, and technology evolves with it, the old ways of thinking sometimes are hard ingrained in these organizations. But you know, there are other options out there in terms of this. So being able to have these cost savings and he’s mad at me and our savings based upon this new technology has been really resonating throughout the market as well. And so really excited about this and taking this to the next level in the future as well as technology continues to improve and change in the coming years.

Loraine Lawson
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