Rise in Finance Firms Testing AI for Compliance and Risk Management, Moody's Study Reveals

A growing number of finance firms are exploring the use of AI for compliance and risk management, according to a recent study by Moody's. The study, part of Moody's 'Entity Verification' 2024 report, surveyed over 300 finance professionals and found that a relatively small number of firms are actively utilizing AI.

Only 11% of respondents indicated their company is currently using AI for compliance and risk management, a slight increase from 9% in 2023. However, there was a significant rise in the number of respondents whose firms are in the trial or pilot phase of AI use, with 29% compared to 21% in 2023.

“Despite the hype, only a small minority of companies are actively using AI for compliance and risk management,” Moody’s noted. “However, many are now in the pilot phase and others are considering its use.”

The study was conducted as an online poll by Context+ in association with Moody's, gathering 310 responses from finance professionals worldwide. It was supplemented with 30 in-depth one-to-one interviews with risk and compliance professionals to provide additional richness and detail.

Moody's highlighted the “clearly growing use of AI for risk and compliance,” with more companies moving from merely considering AI to actively trialing and using it. The report also pointed out that an increasing number of companies are promoting the use of large language models (LLMs), which are computer programs capable of recognizing and interpreting human language.

For firms contemplating the use of AI for compliance, Moody's emphasized the importance of understanding both the risks and benefits. The report stated, “[These include] identifying the potential of bad actors to use these tools to subvert entity verification, or the multiple ways things could go wrong when they are used internally.” It added, “That involves being on the front foot and exploring and trialling new and developing technology as it becomes more sophisticated.”

Moody's also indicated that “size matters” in determining how likely a company is to adopt AI for compliance. “Larger companies are more likely to use or trial AI as they see opportunities to automate tasks and standardise the quality of areas like customer experience,” the report said.

The trend towards AI is evident, with ongoing shifts towards acceptance, encouragement, and adoption as more companies adopt a positive stance on AI. This movement is largely driven by the increased use of safer, private LLMs.

By fLEXI tEAM