AI to Improve Regulatory Compliance, Governance & Auditing. How AI identifies and prevents risks, above and beyond traditional methods. Techniques and analytics that protect customers and firms from cyber-attacks and fraud. Using AI to quickly and efficiently provide evidence for auditing requests.

1. AI in Finance:
Regulatory Compliance, Risk Management, and Auditing
Natalino Busa - Head of Data Science
https://en.wikipedia.org/wiki/File:DTI-sagittal-fibers.jpg

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Head of Applied Data Science at
Teradata
On most networks:
@natbusa

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What’s in the next hour?
Machine learning and cognitive computing for :
• Regulatory Compliance
• Process and Financial Audit
• Operational Risk Management
• Data Management
Discussion
• Q&A
• Ideas, use cases
Recommendations
• Data computing systems
• Tools, and Skills

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A brief history of Regulatory Compliance

5. 5http://www.bibler.org/images/overlay/reni-moses_with_the_tables_of_the_law.jpg

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It does not scale well ...

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Moving towards digital
Design QueriesVerify?
Comply?
Run Queries
Check Reporting

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Meet the band at the bank
Business developer
Data Scientist
Database Admin
Devops

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Approach #1: avoid risk

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Approach #2: Accept Risk

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Approach #3:
Data-Driven Regulatory Compliance

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Data-driven
Compliance
❏ Distributed systems: time
❏ Complete, Correct, Coherent Information
❏ Human and Machine Errors
❏ Incorrect Interpretation of Regulations
❏ Attacks, Frauds, Exploits

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Auditing + Compliance + ORM
Counting Things
Known Knowns
Talking about the:
Expressive Power of SQL

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AI and Machine
Learning to the rescue
NLP - Process Mining
Anomaly Detection - Knowledge Graph

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What is NLP? Transforming free text into
structured data and back
Computer Science + Linguistic
Based on Algorithms,
Machine Learning and Statistics

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What problems does NLP solve?
Question Answering
Machine Translation
Text Summarization
Topic Extraction
Semantic Search
Spelling correction
Sentiment Analysis

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LDA:
extract topics from documents

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Semantic Search
The ... sleeps on the mat
w(t-1) w(t+1) w(t+2) w(t+3) w(t+4)
embedding
w(t)
dog, cat

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Semantic Search Word2Vec, Par2Vec, Doc2Vec
https://arxiv.org/pdf/1405.4053v2.pdf
https://arxiv.org/pdf/1301.3781v3.pdf

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NLP to SQL
Transform Natural Language Question to Database SQL queries

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Google: open source NLP parser
scoring 95% in grammar accuracy
https://github.com/tensorflow/models/tree/master/syntaxnet

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Deep Learning in Language Parsing

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Operational Risk Management
- Benefits -
1. Reduction of operational loss.
2. Lower compliance/auditing costs.
3. Early detection of unlawful activities.
4. Reduced exposure to future risks.
Establish
Context
Risk assessment
Identification
Analysis - Evaluation
Risk
Treatment
Monitor & Review
ORM

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Unknown unknowns in ORM
Looking for something
we don’t know we should be looking for
• Unexpected Services Failing
• Suspicious Access schemes
• Fraudulent Transactions
Looking for Patterns,
Looking for Anomalies
IT Risk
Model Risk
Legal Risk
CyberSecurity
Fraud Risk
Conduct Risk
Money Laundry

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Network Traffic Patterns Classification

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Network Intrusion detection
http://billsdata.net/?p=105
It contains 130 million flow records involving
12,027 distinct computers over 36 days (not
the full 58 days claimed for the entire data
release).
Each record consists of: time (to nearest
second), duration, source and destination
computer ids, source and destination ports,
protocol, number of packets and number of
bytes
Techniques: TDA, Dimensionality Reduction
https://en.wikipedia.org/wiki/Nonlinear_dimensionality_reduction

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AI + Human Intelligence
- It’s a closed loop -

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AI Tools
http://www.shivonzilis.com/machineintelligence
https://www.oreilly.com/ideas/the-current-state-of-machine-intelligence-3-
0

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AI based solutions: Enterprises
http://www.shivonzilis.com/machineintelligence
https://www.oreilly.com/ideas/the-current-state-of-machine-intelligence-3-
0

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AI based solutions: Industries
http://www.shivonzilis.com/machineintelligence
https://www.oreilly.com/ideas/the-current-state-of-machine-intelligence-3-
0

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AI based solutions
AI Tools: Exist but may be too narrow in scope
Data + Libraries + Scientists: Still the way to go for customization

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Thank you.
natbusa

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bonus slides

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Hype it right.
Understand the limitations of current systems
Google’s Self-Driving Car Program Odometer Reaches 2 Million Miles
http://www.wsj.com/articles/googles-self-driving-car-program-odometer-reaches-2-million-miles-1475683321
Deep learning as a tool for increased accuracy and efficiency of histopathological diagnosis
http://www.nature.com/articles/srep26286
Why is AI so difficult?
http://waitbutwhy.com/2015/01/artificial-intelligence-revolution-1.html
http://www.forbes.com/sites/gilpress/2016/10/31/12-observations-about-artificial-intelligence-from-the-oreilly-ai-conference/
http://www.tor.com/2011/06/21/norvig-vs-chomsky-and-the-fight-for-the-future-of-ai/
https://www.safaribooksonline.com/library/view/oreilly-ai-conference/9781491973912/video260721.html
Down the rabbit hole.
https://youtu.be/_1Cyyt-4-n8
https://youtu.be/u6aEYuemt0M
https://youtu.be/bEUX_56Lojc