Next we consider the introduction of Artificial Intelligence (AI) into the compliance profession. A few pieces claimed AI is revolutionary and would change the face of compliance. Well I have some news for such pontificators, technology has been involved in compliance since the profession began in earnest with the implementation of the US Sentencing Guidelines in 1992. One thing is certain however and that is technology that will improve the efficiency of compliance and will assist in the operationalization of compliance into fabric of every business which embraces it.

A recent article in MIT Sloan Management Review, entitled “Building a More Intelligent Enterprise, by Paul J. H. Schoemaker and Phillip E. Tetlock explored how businesses could “blend technology-enabled insights with a sophisticated understanding of human judgment, reasoning, and choice” which will provide to them “an advantage over their rivals”. The compliance professional who incorporates the techniques they advocate into their organization’s compliance program will not only move their compliance program forward but also make their company run more efficiently and, at the end of the day, more profitably.

The reason is not simply that AI can make compliance more effective and more efficient but “in the knowledge economy, strategic advantages will increasingly depend on a shared capacity to make superior judgments and choices.” AI is a step which weds the human interaction and experiences with the data which is available to every company – its own internal information which is most generally sitting in siloed verticals and not being used. This data can “provide the foundation for operations research, forecasting models” when using AI. When you couple this data with the “growing understanding of human judgment, reasoning, and choice” which has provided insights in what humans do well or poorly; you can pair the best of these two seemingly disparate incongruities.

The authors suggest that you use this strategy in an area which will have the greatest benefit for your company, stating, “The starting point for becoming an intelligent enterprise is learning to allocate analytical effort where it will most pay off — in other words, being strategic about which problems you decide to tackle head-on. The sweet spot for intelligent enterprises is where hard data and soft judgment can be productively combined.” For the compliance professional, this translates to your greatest risk area. Consider the possibility that you could identify through forecasting what your highest risk might be, then use AI to more efficiently and accurately assess the risk and finally tie both an AI technology solution with compliance subject matter expertise (SME) to manage the risk going forward.

The key in such a scenario is in aiding the compliance practitioner to avoid judgmental “biases that often distort human information processing and by recognizing the precarious assumptions on which statistical models sometimes rest, the analytical whole can occasionally become more than the sum of its parts.” This means you should critically look at a variety of factors around where your compliance risks lie. Most compliance practitioners only rely on the Transparency International-Corruptions Perceptions Index (TI-CPI) for a country’s corruption rating. While the TI-CPI is a good starting point, it is only that. A compliance analysis that an area is high, medium or even low risk does not consider the starting assumption using the TI-CPI. Moreover, because this Index has been used so long, compliance professionals are biased towards and do not seek out other data which might provide a more nuanced approach.

Another technique which I have been involved with is known as boot-strapping. Here a group of SMEs would develop a model of possible risks which could be assessed with large amounts of data or other inputs. By modeling the experts’ knowledge in risk areas, you could develop not only a more comprehensive forecast and assessment of risk but it would also be more consistent, which would greatly help in your planning and risk management.

The authors reported researchers who asked a group of corn experts to rate 500 ears of corn to predict their eventual prices in the marketplace, using a variety of factors. “The researchers then created a simple scoring model based on cues that judges claimed were most important in driving their own predictions. Both the judges and the researchers expected the simple additive models to do much worse than the predictions of seasoned experts. But to everyone’s surprise, the models that mimicked the judges’ strategies nearly always performed better than the judges themselves.” Most of the factors were subjective but that did not stop the model from being more efficient. The authors believe the boot-strapping model “remains one of the most compelling demonstrations of the potential benefits of combining the powers of models and humans, including the value of expert intuition.”

Boot-strapping is the most straight-forward use of this type of technology, as it is “a simple input-output approach to modeling expertise without delving into process models of human reasoning.” Now consider how boot-strapping can be augmented by AI technologies “that allow for more complex relationships among variables drawn from human insights or from mining big datasets.”

These are but some of the data points which could be inputted and analyzed to determine if any compliance issues arose. But they would also provide the company with a wealth of information on its internal efficiencies around sales and their corresponding processes. The authors conclude by noting, “the cognitive-science revolution holds both promise and challenge for business leaders.” However, when a compliance function embraces the use of AI and embraces this human and technological approach for forecasting and risk assessments and then keeps improving their risk management techniques, it will create a sustainable strategic business, compliance and intelligence advantage over its competition.

Three Key Takeaways

  1. Innovation in your compliance program has been required since the implementation of the US Sentencing Guidelines.
  2. AI can help compliance in the knowledge economy.
  3. AI in compliance will benefit the business going forward.


This month’s podcast series is sponsored by Oversight Systems, Inc. Oversight’s automated transaction monitoring solution, Insights on Demand for FCPA, operationalizes your compliance program. For more information, go to