Will AI revolutionise the banking and legal sector?
Of all the digital technologies that are driving change in businesses, Artificial Intelligence (AI) is perhaps the most disruptive of all and has taken over the globe by storm.
Currently, AI based technology solutions are being deployed in manufacturing, automotive, e-commerce, construction, smart cities and warehousing. However, within the legal and financial sectors, the implementation of AI is not as rapid. With a fast-changing environment, adaptation of new emerging technologies and increasing volumes of information, we will have to accept that AI will be taking over significant aspects of jobs in the future.
According to a recent study by the International Data Corporation, worldwide data is expected to grow 61 per cent to 175 zettabytes in five years. Financial institutions deal with tremendous volume of data. Leveraging AI will put financial institutions ahead of the game, this can be done by utilizing effective natural learning processing (NLP) machine learning (ML), mathematical algorithms, predictive coding and data science. Zettabytes of data can also be analyzed to detect certain patterns, key documents and fraudulent activities in real time.
Financial institutions have normally been early adopters of technology, but in this constantly changing environment, firms may find themselves vulnerable as transactions grow rapidly. This is compounded by fraudsters becoming smarter and also using new technology to their advantage. The application of AI allows financial institutions to predict and prevent future fraudulent activities through spotting and analyzing patterns. A case that would usually take months to uncover when done by the average human could be complete in a couple of hours using AI. Furthermore, AI can detect outliers that represent unseen forms of fraud and reduce false positives. Statistics show that a high percentage of suspicious cases investigated by banks turned out to be not fraudulent.
According to the estimates published by the United Nations on the impact of money laundering on the economy, up to $2 trillion is laundered every year. Additionally, in 2019 only, US and UK regulators imposed fines totaling $8.14 billion for anti-money laundering violations. This shows that with the high scrutiny placed by regulators and their investigations joined with the complexity of data along with heavy reliance on human involvement makes anti-money laundering (AML) very difficult which has also led to compliance costs doubling in the last give years.
Financial institutions today need to revamp their strategy and respond quickly to this new technological wave through implementing more robust tools coupled with effective governance. That means implementing AI in institutes will minimise the risk of fraudulent transaction, cybercrime, and money laundering. Financial institutes will also need to increase their technology budget considering that AI cost-benefit analysis overweighs the bank's high running operational costs and the time & effort required for high volume of false positives. In the United States, regulators have started encouraging banks to consider AI to enhance their AML compliance programs. Following the regulators recommendations, it's only a matter of time that other regulators will do the same. Regulatory requirements have only been increasing resulting in tightening the compliance function.
In a constantly evolving economy, the UAE is advancing in this field as the first country in the Arab World to appoint a government minister dedicated to AI and launch the first AI strategy for 2031. The UAE is incorporating AI in education and healthcare and also integrating AI in aviation and transport industries as well as in smart cities. The field is set to contribute the most amount of money to the country and is estimated to contribute almost 14 per cent of the national GDP in 2030, which is equivalent to $96 billion.
In the legal industry, technology assisted reviews and investigations have been part of the job for many years now, aiding investigators, litigators and arbitrators with many document review platforms, disclosure, tagging and bundling tools as well as keyword search methodologies to identify critical pieces of evidence and information to aid the decision making process. With the recent exponential expansion of AI into our lives due to more sophisticated and more affordable tools and solutions, there's an ever-growing push to fully take advantage of AI capabilities in arbitration and litigation proceedings. There are increasing talks about how Online Dispute Resolution (ODR) may enhance Alternative Dispute Resolution and Access to Justice, or perhaps how introduction of machine learning solution and intelligent robotic agents would assist Self-Represented Litigants or law income individuals.
Although there are many sceptics in the legal society about AI and algorithms partially replacing let alone fully removing human factor from decision making processes and judgments, the trend of digitization and more widely use of intelligent technology with a decision-making capability seem to be irreversible. Perhaps we have to acknowledge and accept that we are moving rapidly into a space where certain tasks currently performed by paralegals will sooner than later be replaced by AI agents and robots; and complex decision making can and will be performed without a human factor, based on evidence provided and historical information.
- James Daniell and Janusz Oczyp are the managing director and director at Alvarez & Marsal in Dubai. Views expressed are their own and do not reflect the newspaper's policy.
MBZUAI and Hyperloop will engage the best AI minds of both teams. READ MORE
Our action underscores Dubai's commitment to always meet its... READ MORE
The International Monetary Fund (IMF) projects a 4.9 per cent decline ... READ MORE
The developer has seen its share price fall by around 80 per cent, to ... READ MORE
Industry representatives praise authorities for their management of... READ MORE
The withdrawal will take effect on July 6, 2021 after Trump blamed... READ MORE
A 3,000-bed field hospital was set up at WTC in April to treat... READ MORE
239 scientists in 32 countries outlined evidence that shows floating... READ MORE