- 35% of respondents identified advanced technologies and artificial intelligence (AI) as the main influences on their near-term compliance efforts
- As firms adapt to a changing environment, they are hiring more data scientists and related specialists
Nasdaq released the results of its ninth Annual Global Compliance Survey, revealing the latest trends and challenges in compliance and surveillance within the financial services industry. The global survey gathered insights from 94 compliance professionals across the sell-side, buy-side, and financial market infrastructure sectors.
“The financial services industry is operating in an incredibly complex and dynamic environment, having to respond to ever more sophisticated regulatory requirements, financial crime, and operational challenges,” said Ed Probst, senior vice president for Regulatory Technology at Nasdaq, in a statement “Technologies like AI and cloud have the power to enhance strategic insights and dramatically improve efficiency but require a workforce able to understand, develop, and deploy the capability. We’re seeing firms increasingly turn to regulatory technology platforms and supplement their workforce with data scientists and other specialists, to handle the changes and challenges of regulatory compliance.”
AI, cloud, and data quality
Faced with greater regulatory oversight, firms are focusing not only on adhering to regulations but also leveraging advances in technology to gain a strategic edge. Of the respondents, 35% expect technologies like AI to be the biggest driver of compliance process change over the next year, compared to 9% last year, and 0% the year prior. This shift marks a move away from simple workflow tools towards more data-driven investigative approaches.
Improving data quality, integrating data sources and the cloud, and developing cross-product surveillance and related tools were all identified as areas where firms are likely to invest over the next 12 to 24 months. One major challenge this could help address is in the case of false positives, where advanced data processing and AI can be used to improve the quality of alerts flagged up by automated systems.
Many compliance teams have devoted significant effort to minimizing them, with almost 90% acknowledging that reducing the number continues to be extremely or somewhat challenging. These false positives can be highly disruptive, leading to unnecessary investigations, wasted resources and potential delays in identifying genuine threats.
Data management skills
Looking ahead to the next 12 to 24 months, firms are redirecting their investment in talent towards data scientists (12%) and additional support staff (13%). This shift indicates a growing recognition among organizations of the critical role that advanced technology and sophisticated data analysis plays in strengthening modern compliance systems and controls.
In addition, the increased demand to hire junior resources reflects a need to analyze ever increasing amounts of data, and that rapid deployment of AI and other algorithmic processes are not being delivered as part of a cohesive data, analytics and analysis strategy.
This aligns with broader trends in the finance industry where front office teams and risk functions are increasingly investing in their underlying data infrastructure and advanced technology capabilities, including the use of sophisticated tools and systems for real-time monitoring and predictive analytics.
Compliance at forefront
Surveillance and compliance teams continue to maintain a prominent voice in business decisions, with respondents either strongly agreeing (44.7%) or agreeing (31.3%) that they have a seat at the table. They are considered an integral component of risk management, ethical business practices and corporate governance to maintain and protect brand reputation and trust.
Regulatory-focused spending therefore continues to rise, although the pace of growth is moderating as firms adjust to the evolving landscape. More than 40% of firms reported increased compliance spending this year, consistent with the steady budget increases observed over the past nine surveys.
There has however been a significant shift in how organizations allocate their tech budgets, reflecting the move away from traditional workflow and transaction monitoring to invest more in advanced analytics.