Financial institutions operate in an increasingly regulated landscape. Compliance teams are under pressure to keep on top of all the changes, but AI is opening up new opportunities. Together with one of its clients, Valcon is developing a Regulation Radar that helps business experts to monitor the regulatory environment. AI – which is itself subject to heavy regulation – can help organisations gain better control, making compliance not only manageable but also a source of strategic advantage.
The world of financial regulation rarely stands still. There is always some new or updated legislation being introduced, court rulings that come out or the latest trend reports published – and all of these can impact business operations. Compliance teams have to monitor all of this new stuff, while also reviewing existing policies – a dual burden that adds exponentially to the workload. Paul Cox, AI Advisory Lead at Valcon, explains: “It’s not just compliance legislation from regulatory bodies you also need to keep eyes peeled for other types of industry news that could shape future laws.”
The cost of missed signals
Traditionally, regulatory monitoring has been mostly manual. It involves team members reading newsletters, checking websites and tapping into their networks – basically, being proactive to stay on top of regulatory news. But this approach is slow and by no means failsafe, as it risks missing out on important developments.
For financial institutions, being non-compliant with industry regulation is not an option. The consequences of non-compliance are direct and tangible, such as costly remediation programmes or significant fines. But there is also the opportunity cost of non-compliance, such as reputational damage or loss of business or market share.
The case for smarter and faster control is clear: it’s about risk reduction and freeing up the valuable time of compliance experts so they can focus on assessing impact and making decisions.
Always on’ regulatory monitoring
This is where the Regulation Radar comes in. This is an ‘always on’ hybrid system – consisting of AI and software – that scans all relevant online sources to identify anything which could have an impact on regulation. Given that this job has been predominantly manual, the Regulation Radar saves a lot of time, freeing up the compliance team to focus on higher-value tasks.
AI is not a replacement for human regulatory expertise – it enhances it. The system filters and prepares information, so compliance professionals can quickly focus on assessing the impact, while final decisions remain with human experts.
Not just regulatory adherence
The Regulation Radar is a system that not only detects new signals but also compares them with existing policies to assess their impact. As Paul notes, “AI is one of the most regulated technologies, yet it’s helping us get a grip on regulation itself. Generative AI is especially suited to these text-driven processes that are prevalent in the regulatory environment.”
The Regulation Radar helps with more than just regulatory adherence and risk management. By detecting relevant signals early, organisations can integrate these insights into policy development, anticipating regulatory changes ahead of their competitors, helping to turn it into a strategic advantage.
Early lessons
The idea for the Regulation Radar originated from compliance professionals themselves, who recognised AI’s potential when it is used responsibly. The development of the system is multidisciplinary – AI specialists build the system while business experts provide relevant knowledge, and compliance professionals ensure it fits into their workflows. Audit trails are critical: for every detected signal, its source, reason for relevance and expert assessment are registered in a bid to foster transparency and accountability.
Initial testing revealed that a hybrid model works best: RSS-first, AI-second. Reliable RSS feeds provide primary and known signals. AI can then add broader industry developments and conduct an impact analysis based on existing criteria. In one of the test runs, a new signal – one that traditionally might have been missed – popped up and was actioned straight away, whereas before it might have taken some time.
This particular case involved a political debate where the financial institution’s name was mentioned. Questions were being asked about the firm’s role in the debate. By identifying this signal, the client was able to prevent the development from taking them by surprise. Regular validation and expert reviews keep system performance high over time and aligned with responsible AI practices.
Compliance as a strategic edge
The Regulation Radar unlocks new opportunities – it marks a time when compliance moves from being a reactive business function to being a proactive one. And it’s very scalable both within and across companies. For our client, it now means a centralised and traceable source of information on applicable laws and regulations is in place. This ensures full visibility over all regulatory requirements, confirms they are systematically monitored and clearly defines ownership and accountability.
By systematically monitoring the regulatory landscape, organisations can stay ahead of developments. The Regulation Radar shows that innovation and accountability can go hand in hand. In a sector facing growing regulation and efficiency demands, combining human expertise with AI is a promising and strategic way forward.
