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California Bar Exploring Opportunities To Deploy AI

The agency is examining how artificial intelligence could help it review misconduct complaints and administer the bar exam.


The State Bar of California has started wading into the artificial intelligence waters.

The agency is exploring ways AI could help bolster the efficiency of its attorney discipline system and assist with administering the bar exam.

The bar recently entered into a contract with the MITRE Corporation to help it develop and evaluate algorithmic processes for identifying whether aattorney misconduct complaint could be closed without investigation.

State Bar Executive Director Leah T. Wilson said if an AI tool can be crafted to help the bar more speedily review whether to close or investigate complaints, it would reduce the administrative burden on staff. That in turn would allow the bar to shift its “human resources to other parts of the case processing continuum,” Wilson said.

Freeing up staff to assist with serious allegations of lawyer misconduct could be beneficial in light of the state auditor’s recent recommendation that the State Bar not hire as many new employees for its discipline unit as desired.

Wilson said an AI tool could also assist in ensuring a level of consistency and standardization in the bar’s review of the roughly 16,000 attorney misconduct complaints it receives annuallyThe technology could be especially helpful amid a nearly 60 percent increase in complaints made to the bar in recent months, a bump that has come amid the agency starting to accept online complaints.  

It was the transition last fall to permitting online complaints that allowed the bar to even contemplate an AI tool for reviewing such filings, according to Wilson.

She stressed that the MITRE project is in the early stages, and the bar will closely examine the effectiveness of the tool developed.

“If it’s not reliable to a very high degree of statistical significance, we couldn’t implement it,” Wilson said.

The bar’s $90,000 contract with MITRE, which was signed last month, calls for the company to complete its work on the project by mid-October.

Meanwhile, the State Bar is planning to use AI to help it administer the First-Year Law Students’ Examination, known as the “Baby Bar.” Law students completing their first year of law study at an unaccredited law school or through the Law Office Study Program are among those who must take the test.

At two of the sites where the Baby Bar will be given next month, the bar will be piloting the use of AI proctors for the essay portion of the exam that is taken on computers, Wilson said.

Live proctors will be there as well to ensure things go smoothly and to respond if the AI software alerts them to any patterns of eye movement or gestures out of the norm for test takers.

“If all goes well, it is our intention to deploy AI proctoring for the July bar exam,” Wilson said.

The bar began exploring AI proctoring because it struggled last year to attract enough proctors to administer the exams it gives to prospective lawyers.

Wilson said there will still need to be some human proctors present at future exams for security purposes and to help with any issues that arise, according to Wilson. But she said a successful pilot of AI proctoring would reduce the overall need for human proctors moving forward. 

On both the bar exam and attorney discipline fronts, Wilson said the bar is seeking to strike the right balance between being forward-leaning while protecting against the risks that arise with the deployment of new technologies.

I think it is the responsibility of good government everywhere to figure out how we can take advantage of technology to improve the services that we provide to the public,” she said.

Separate from the initiatives mentioned above, a bar task force is actively working to identify regulatory changes that would provide members of the public with greater access to legal services through technology, such as AI. The next meeting of the Task Force on Access Through Innovation of Legal Services is Monday, May 13.


*This article first appeared on Evolve the Law. 

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Event: Legal Futures Regulation and Compliance Conference 2019

Date: 6th June 2019 (09:30 – 17:00)

Venue: Cavendish Conference Centre, London

Phone: 020 3567 1207

Email: conference@legalfutures.co.uk

Regulation and compliance have never been more of a priority for law firms – and on top of that, the SRA’s new Standards & Regulations come into force later this year.

This major conference brings together experts from a range of disciplines – as well as all the leading regulatory bodies – to examine the ever-growing challenges to lawyers, with a particular focus on the new solicitors’ rulebook, professional indemnity insurance, well-being and fraud.

Conference website

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Sustainability of self-regulation scrutinized in Ontario

Bencher candidate John Nunziata says he thinks the provincial government may have to intervene in the legal profession’s self-regulation model following the bencher election ending April 30.

Nunziata told Law Times that he has heard the proposition of reviewing the Law Society Act discussed among Ontario’s members of provincial Parliament who watch the legal profession. However, Law Times requested interviews with 14 MPPs who have backgrounds as lawyers and none accepted.

Several MPPs, including a spokesperson for Attorney General Caroline Mulroney, repeated the same message.

“The Law Society of Ontario has a mandate to regulate lawyers and paralegals in the public interest. Questions regarding the law society, the bencher election and the regulation of lawyers should be directed to the law society. The attorney general looks forward to working together with the law society in the future on legal issues that affect the people of Ontario,” said an email statement.

Nunziata, a former member of Parliament, would not reveal which MPPs he had spoken to.

Still, Nunziata says he thinks that issues such as low voter turnout, a budget deficit and the divide over the statement of principles requirement could draw the attention of Queen’s Park.

“The fact that the public is not on the side of lawyers — because most people have a negative opinion of lawyers — there are politicians that would say, ‘Well, let’s review what’s going on here.’ For one, conservatives do not believe in running deficits in principle,” says Nunziata.

Rebecca Bromwich, a faculty member at Carleton University in Ottawa who is running for bencher, has studied the topic of self-regulation and its ability to deal with complicated issues such as money laundering.

She concluded, in that research, that government should support self-regulation in the public interest. She says she is not privy to any comments from MPs about the LSO, and said that although Canada’s self-regulation model differs from other countries, the public and political will has typically not supported changing the model.

Bromwich also said there are some positives to self-regulation, and that critics of self-regulation may not consider how a government would undertake the same task. She says that centralising regulation in the government might be at odds with a more conservative political view.

“I think every election is important. I think it would be great if lawyers think it is important,” she says. “Benchers reduced the size of Convocation before this election, so it seems like if there are generally views of reducing the size of the regulatory body, most people seem to be the same page. It’s whether the government should be the one doing it.”

Nunziata says the LSO is an outlier compared to professions that are regulated by an appointed board, rather than a large election, such as the one taking place now.

“It’s important for lawyers to vote, it’s important for the law society to be truly representative of lawyers and paralegals,” he says. “Yes, one of the mandates is to govern in the public interest, but I think there is also an obligation to make sure the needs of lawyers and paralegals are addressed as well.”

The law society’s governance task force is currently considering options to shrink the number of benchers in Convocation.

Susan Tonkin said in an e-mail on behalf of the LSO saying, “The Law Society governs Ontario’s lawyers and paralegals in the public interest. Self-regulation strengthens the independence of the bar and protects the rule of law, which are two critical underpinnings of a democratic society. We look forward to continuing to work with the government and other legal stakeholders as we continue to fulfill our mandate.”

Several examples put forth for a call for comment by the governance task force suggest decreasing the number of elected benchers, which would proportionately give appointed benchers more sway.

At the time of the call for comment, in November 2018, Mulroney said in a letter that the provincial government “believes that it is vital that governing bodies are streamlined and efficient,” adding that her ministry would “fully endorse efforts to reduce the total number of benchers at Convocation to facilitate quicker and more effective decision-making and cost effectiveness.”

Nunziata points out that the provincial government recently cut the size of Toronto’s city council to 25 members from 47.

One skeptic of the LSO’s governance model has announced a run for office: Anita Anand, a law professor at the University of Toronto, said on April 2 that she is seeking the federal Liberal Party nomination in the riding of Oakville, Ont. Anand’s’ research into the topic was recently publicized through a newspaper article titled “Ontario’s law society needs to address problems in self-regulation.”

“Self-regulation opens the possibility of conflicts of interest: lawyers governing themselves may, in making rules for the profession, make decisions that benefit themselves rather than the general public, who may be unable to protect their own interests,” she wrote in the article.

“As a result of these concerns, both Britain and Australia have moved away from self-regulation.”


*This article first appeared in Law Times.

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University of Alberta professors found governance ‘lodge’

Hadley Friedland was just outside a conference room in Edmonton, speaking over the phone about a presentation on Indigenous law she’d just made to a room full of lawyers and legal academics. The conference was being sponsored by the Law Society of Alberta.

Around the country, First Nation communities, in “acts of self determination,” are striving to rebuild their own laws and governance structures from the legacy of the colonial era. And Canada’s legal community, says Friedland, an assistant professor of law at the University of Alberta, has become eager to discover how Indigenous concepts of law are influencing case law, legislation and legal practitioners.

In that vein, Friedland, along with Shalene Jobin, an associate professor in the U of A’s Faculty of Native Studies and a director of the U of A’s Indigenous Governance and Partnership Program, co-founded the Wahkohtowin Law and Governance Lodge.

Though there are no logs — for the time being the lodge is more a virtual repository for Indigenous legal knowledge than it is a physical structure — Wahkohtowin began its research and work developing Indigenous law at the beginning of May.

The lodge has been funded with a two-year, $567,400 grant from the Alberta Law Foundation. The project honors call to action #50 from the Final Report of the Truth and Reconciliation Commission of Canada, which asks Canada to develop Indigenous law institutes throughout the country in collaboration with Indigenous communities. Wahkohtowin “advances one of the key objects of the Foundation, which is to support Indigenous legal programs,” Darlene Scott, chairwoman of the ALF, said in a statement.

Friedland and Jobin were inspired to approach the law foundation by the research of influential Cree activist Val Napoleon, who entered law school as a grandmother. Napoleon, now research chairwoman and Law Foundation Professor of Aboriginal Justice and Governance at the University of Victoria, established the Indigenous Law Research Unit at UVic’s Faculty of Law and has amassed a storehouse of British Columbia’s Indigenous legal traditions and theories. The work of ILRU became the foundation for the world’s first Indigenous law degree program, launched at the university last year.

“Dr. Napoleon coined the phrase ‘Indigenous legal lodge’ to hold her work,” says Friedland, who earned her law degree at UVic. “And that’s a concept we are working with.”

The Wahkohtowin Lodge’s work has begun with outreach to First Nations communities in Alberta hungering to “try and articulate and identify their own laws and legal principles.” Those principles will cover every kind of legal practice area that exists, because, Friedland says, “Indigenous societies are whole societies as well. Shalene’s work speaks to that.” But, adds Friedland, asked if some communities might resist working with academics, even if they have Indigenous heritage, “We are not going to just show up at the door of communities and ask to work with them. We will respond to invitations of interest from communities. And there’s no shortage of that.”

Already, in its first stage, Wahkohtowin has projects on the go, says Jobin. At the end of May 2018 Wahkohtowin held a three-day workshop at the U of A where elders, community leaders and members of the law profession worked together to help communities determine the vision of legal governance they want.

In a pilot project, says Jobin, the lodge has also been asked to help the Aseniwuche Winewak Nation near Grande Cache, Alta. to develop its own constitution-building resources. “We were approached by a community to do that work and that is happening right now as well.”

Friedland says there is an urgent need for Canada’s judges, lawyers and law students to increase their competency in Indigenous law.

“We have this educational deficit in Canada where we haven’t been teaching Indigenous law in law schools for 100 years. So [lawyers] are realizing they need more resources to be able to competently practise.”

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New Irish legal watchdog hindered by deadlines

The State’s new watchdog for the legal professions has warned its work is being frustrated by the requirement to meet deadlines set out in its grounding legislation.

The Legal Services Regulatory Authority (LSRA) has called for changes to the Legal Services Regulation Act 2015 to allow it to fulfil its statutory role to oversee services provided by solicitors and barristers.

The authority claimed the “hard wiring” of the legislation which provides for the automatic triggering of certain actions without due consideration of the resources and infrastructure required to implement them was “unhelpful”.

“The establishment of the LSRA as a fully functioning regulatory body has been delayed due to the requirement to meet statutorily mandated deadlines that run throughout the Act,” the LSRA said.

It is understood officials have been concerned about the requirement to deliver a series of mandatory public consultations, reports and actions within set timelines.

The watchdog claimed such deadlines were “restrictive, resource intensive and not conducive to the ordered roll-out of its regulatory functions.”

The findings are contained in a new review of the operation of the Legal Services Regulation Act 2015.

The LSRA said legislative changes were necessary to ensure the funding model envisaged by the Act would operate to provide sufficient and sustainable funding that would allow it to carry out its oversight work.

The legal services watchdog is expected to be self-funding from a new levy which will be imposed on all registered barristers and solicitors.

However, a consultant’s report has warned that it is likely to operate in deficit in its early years with “an increasing reliance” on government funding to fulfil its mandate.

The LSRA has signalled it hopes to start accepting complaints from members of the public against solicitors and barrister from October 2019.

The watchdog has made a total of 42 recommendations for amendments to the legislation to Justice Minister Charlie Flanagan.

A spokesman for Mr Flanagan said the minister and his officials were giving “detailed and open consideration” to the LSRA’s recommendations.

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Solicitors Regulation Authority publishes Residential Conveyancing thematic review

A review about the service provided by solicitors to the public

Executive summary

Buying and selling a property is often the most expensive and important financial commitment a person makes in their life. Having access to reliable and good quality legal support really matters. It not only reduces stress and uncertainty, but potentially directly impacts on whether a purchase is completed, and what the long-term financial implications may be for all involved.

While most property transactions are completed relatively seamlessly, figures from the Legal Ombudsman (LeO) show that residential conveyancing accounted for nearly a quarter of all complaints it handled over the past three years.

Our own research of consumers, conducted in 2018, also identified that up to a quarter of recent home buyers were dissatisfied with some element of the service they received from their solicitor. One common area of concern was an apparent failure to fully explain the detail and implications of contractual commitments.

What we did

We carried out this thematic review to better understand how firms are delivering residential conveyancing services, and whether they are fulfilling their obligations to their clients.

We visited a sample of 40 law firms offering residential conveyancing services and conducted a detailed review of 80 case files.

What we found

We found that most firms were fulfilling their obligations. In particular, we found that:

  • all firms proactively communicated with clients at all key stages of a purchase, with the majority meeting them face-to-face at least once
  • all firms provided clients with clear information on their complaints procedures
  • firms are increasingly embracing technology, especially regarding how they communicate with clients.

However, we did identify areas for improvement. The two most significant and widespread were:

  • inaccurate initial cost estimates – 34% of firms failed to include all the services/fees a matter could reasonably expect to attract in their initial quotes
  • not being open about the real cost of third-party disbursement and their firm’s mark-up on these – specifically telegraphic transfers. In 37% of cases firms failed to do this, with some charging up to 10 times the actual bank charge for processing the transfer.

Other areas where we identified potential concerns included:

  • not processing paperwork efficiently – especially in relation to requisitions raised by HM Land Registry
  • not explaining the difference between freehold and leasehold ownership
  • failing to double-check that a client understands the long-term implications of contractual obligations and fees.

Conclusions

This review clearly found that in the majority of cases, conveyancing firms actively engage with their clients and fulfil their obligations to them. Property deals progress in a timely and efficient manner and clients feel informed and supported throughout.

But sadly, this is not always the case.

Whether its providing unrealistic or incomplete quotes, or failing to make sure contractual information has been fully understood, solicitors are potentially leaving their clients exposed to significant risk or potential financial hardship.

Next steps

This thematic review took place during 2018. In December the same year, we introduced new transparency rules which require firms offering conveyancing services to publish detailed price and services information, and their complaints procedures online.

The requirement to provide clear pricing information was not new. However, these rules, and associated guidance, now provide the profession with absolute clarity on our expectations for how they should be publishing price information.

These requirements include:

  • outlining all known and potential costs a transaction may attract from the outset
  • specifying all charges being added to the actual cost of any third-party disbursements.

As part of our ongoing work, we will continue to review compliance with these rules and will consider further action where necessary to make sure they are being followed.

On the specific subject of making sure solicitors explain contractual details to clients, especially in relation to leaseholds, we urge all firms to make sure that their clients understand their obligations. If we find evidence that people were not made aware of onerous clauses in their leasehold contracts, such as the regular doubling of ground rents, we will take robust action.

Following this review, we referred six firms onto our internal disciplinary processes. Five of these referrals included concerns about failing to declare that the stated telegraphic transfers fees included an additional charge/mark-up.

Read the full report here

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Independent Review of UK Legal Services Regulation Launched

The Centre for Ethics and Law in the UCL Faculty of Laws is undertaking a fundamental review of the current regulatory framework for legal services, led by Honorary Professor Stephen Mayson.

The independent review is intended to explore the longer-term and related issues raised by the 2016 Competition and Markets Authority (CMA) market study, which concluded that the legal services sector is not working well for individual consumers and small businesses, and that the current regulatory framework is unsustainable in the long run.  It called for a review of that framework to make it more flexible as well as targeted at areas of highest risk where regulation is most needed.

The review’s objectives will be to consider how the regulatory framework can best:

  • promote and preserve the public interest in the rule of law and the administration of justice;
  • maintain the attractiveness of the law of England & Wales for the governance of relationships and transactions and of our courts in the resolution of disputes;
  • enhance the global competitiveness of our lawyers and other providers of legal services;
  • reflect and respond flexibly to fast-changing market conditions being driven by innovation and advances in technology;
  • protect and promote consumers’ interests, particularly in access to effective, ethical, innovative and affordable legal services and to justice; and
  • lead the world in proportionate, risk-based and cost-effective regulation of legal services, consistent with the better regulation principles.

The review will reflect these objectives and consider how we can best ensure that our legal services remain of high quality and are effective, and that their regulation is proportionate and fit for purpose.  It will also need to re-examine how to give the public much-needed transparency about the legal providers they use and the services they pay for, and ensure that they understand their options and the consequences of their choices.

The first two working papers are already published.  Each of the working papers will address the issues and challenges raised by the four fundamental questions of the review:

  • Why should we regulate legal services? (Rationale)
  • What are the legal services that should be regulated? (Scope)
  • Who should be regulated for the provision of legal services? (Focus)
  • How should we regulate legal services? (Structure)

In pursuing its work, the review will seek to engage with a wide range of stakeholders and interested parties, including the CMA, the Legal Services Board, approved regulators, front-line regulators, representative bodies, consumers, the judiciary, practitioners, and providers of legal education and training.

It is now open for submissions in response to the working papers, and for meetings and discussions to explore the issues: to follow up, contact Professor Stephen Mayson.

Read more at the University College London Independent Review of Legal Services Regulation page.

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California Bar Task Force Weighs in on Utility of Legal Tech Tools

There are more than 320 digital legal tools designed for use by non-lawyers in the U.S., but access to justice expert Rebecca Sandefur says the potential for the technologies to assist Americans with their civil justice problems has largely gone unrealized.

“Most of the tools that exist right now are neither efficiently scalable nor legally empowering, but there’s no reason it has to stay that way,” Sandefur said this week.

The associate professor at the University of Illinois at Urbana-Champaign was speaking during a Monday meeting of the State Bar of California’s Task Force on Access Through Innovation of Legal Services.

The 23-member panel is charged with “identifying possible regulatory changes to enhance the delivery of, and access to, legal services through the use of technology, including artificial intelligence and online legal service delivery models.”

Sandefur told the group that one promising digital legal is JustFix, a free app that allows tenants in New York to notify their landlord of issues needing repair.

The app has a tenant go through a room-by-room checklist and upload photos, as well as other information, to document habitability problems. The tool then uses a lawyer-approved template to send a certified letter to the tenant’s landlord outlining the concerns that need to be addressed to comply with housing codes.

“There are very few things like this, but obviously there is a lot of potential here to work on specific problems in a focused way,” Sandefur said.

She said one reason there are not many effective tools was developers’ fears of facing unauthorized practice of law allegations.

“Right now, the reason most of these tools are terrible is because there are deep concerns in the community of developers that you are going to go after them if they create a tool like JustFix that does something useful because it’s nudging up against the edge of giving legal advice,” Sandefur said.

She said those fears were being driven by one of two things: either the developer community does not have a proper understanding of what constitutes legal advice, or the restrictions on unauthorized practice of law are too stringent.

If the bar task force determines California’s unauthorized practice of law regulations are too restrictive, Sandefur encouraged the panel to carefully consider ways to relax them so that tools helping consumers with their civil justice problems “can be useful, as well as used.”

Task force member Lori Gonzalez said she certainly would like to see the bar make it easier for non-attorneys to innovate in the legal tech space.

Gonzalez noted that lawyers “by personality are abnormally adverse to risk, which is the opposite of what you need to be an entrepreneur or to push innovation.”

The task force is charged with reviewing the consumer protection purposes of the prohibitions against unauthorized practice of law (UPL) and “the impact of those prohibitions on access to legal services with the goal of identifying potential changes that might increase access while also protecting the public.”

The panel is also examining alternative business structures, multidisciplinary practice models, lawyer advertising, and fee splitting. The task force is slated to submit its final recommendations to State Bar’s Board of Trustees by the end of 2019.

Sandefur said the discussion at the task force meeting left her encouraged about the group’s efforts, and she told the panel they had a terrific opportunity to make a nationwide impact in this arena.

“If California does something good, it helps a whole lot of people,” Sandefur said. “But it’s also a great model for the rest of the country, so I’m delighted that you are starting to work on this.”


*This article first appeared on Evolve the Law

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Artificial Intelligence in Regulatory Technology (RegTech) – 5 Current Applications

Last year, Boston Consulting Group reported that banks were tracking three times as many individual global regulatory changes as compared to 2011. The report added that these institutions were averaging 200 regulatory revisions per day in 2017.

RegTech often refers to the use of cloud computing technology through software-as-a-service (SaaS) with the aim of helping businesses conform to regulations faster and less expensively. In this piece, we aim to explore current applications of artificial intelligence in the RegTech space and coax out the broad segments under which they can be classified.

Through our preliminary research, we identified the following three major application segments for AI in regulatory compliance:

  • Stress Testing for Financial Forecast Models
  • Automation for Tracking and Monitoring of Regulatory Changes
  • Machine Learning for Enterprise Email Filtering

Below, we will highlight five companies that offer AI services for regulatory compliance from each application segment. We will also go into more details about how AI vendors are helping financial enterprises manage their regulatory processes by looking at use-cases and examples.

We distill the applications for each company with the aim of exploring how AI is being used for RegTech today and how can enterprises augment the capabilities of their compliance teams.

Stress Testing for Financial Forecast Models

Ayasdi

California-based Ayasdi, founded in 2008, claims to offer big data analytics and artificial intelligence services. The 120 employee company was co-founded by Gunnar Carlsson, Professor Emeritus in the Department of Mathematics at Stanford University, and CEO Gurjeet Singh who previously earned a PhD from Stanford in computational and mathematical engineering.

Ayasdi claims that their artificial intelligence platform, Ayasdi’s Model Accelerator (AMA) can help enterprises in financial services to predict and model regulatory risk. The company also claims that their platform can achieve this by using machine learning to find hidden patterns in historical financial data or for forecasting revenue data. The company claims it could help banks in the following ways:

  • Establish and adhere to regulations for anti-money laundering (AML). The company claims this may be particularly challenging for banks and that non-compliance can potentially result in fines of over tens of billions of dollars.
  • Help banks to automatically monitor customer transaction data to identify anomalies and ensure that they are compliant with regulatory requirements..
  • Help global banking clients reduce false positive rates in fraud detection as compared to traditional rule-based methods used by most banks traditionally, while still identifying a similar number of suspicious activity reports.

Below is a video from Ayasdi where Senior Data Scientist Jesse Paquette demonstrates and explains how the platform might be used for fraud detection applications:

Ayasdi reports that it’s platform runs on a Topological Data Analysis (TDA), which was developed for a project funded by DARPA

Below is short 2-minute promotion from Ayasdi where its core team members explore how the platform might be beneficial to enterprises in different applications:

Our preliminary research led us to two case studies from which we discuss their collaboration with Citi Group in further detail. According to a 2017 case study from Ayasdi, the company was chosen by Citi to help create justifiable models of Citi’s revenue and capital reserve forecast to pass the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) process (which was initiated after the 2008 financial recession to a bank’s financial foundation).

Before working with Ayasdi to improve it’s capital planning process, Citi had failed the first two out of three annual CCAR stress tests. Ayasdi’s first steps with the company involved using subject matter expertise from the leaders of the bank’s business units regarding to review some of the banks macro-economic variables like revenue and capital reserves as stipulated Federal Reserve.

Ayasdi claims the machine learning platform was then used to correlate the impact of these variables on each business unit’s monthly revenue performance over a six-month period and models were developed to predict the future performance of these business units. Lastly, Ayasdi claims that the business unit heads were once again roped in to evaluate the predictive model final performance.

According to Ayasdi, streamlined Citi’s nine-month process requiring hundreds of employees to a three-month process, utilizing less than 100 employees.

Along with Citi, the company has also worked with HSBC for an anti-money laundering application. An Ayasdi brochure also claims that one of the Top 3 Nordic Banks used the AMA platform to predict the probability of default models for mortgages, identified strong and weak fit areas, and adjust their models with targeted fixes. The brochure did not go into further detail about this client’s use of the program.

Automation for Tracking and Monitoring Regulatory Changes

CUBE

London-based CUBE, was founded in 2011 and claims to offer a RegTech platform that can help businesses cut regulatory costs and minimize risk of non-compliance. The 94-employee company claims their platform can assist in predicting compliance risk, automating AML, Know Your Customer (KYC) and Cyber/information security processes.

CUBE states that the platform uses machine learning to help enterprises to automatically keep track of global regulatory data and prompt alerts by detecting regulatory changes that pose a compliance risk. The company claims it has created a regulatory ‘data lake’ that covers the regulations for financial services organizations across the globe. We, however, could find no evidence of how extensive their database is.

Below is a four-minute interview from the International Compliance Association where CUBE Founder and CEO Ben Richmond explores the role of AI in managing regulatory risks and details how CUBE is applying AI to this problem:

According to CUBE’s website, some ways in which enterprises might benefit from CUBE’s regtech platform include:

  • Helping Identify global regulations and compliance requirements and automatically keep track of any changes to these regulations.
  • Enterprises might identify in real-time internal regulatory gaps in policies and procedures
  • Businesses engaging in cross-border selling might use the CUBE platform to gain an understanding of the rules and regulations for business across borders and build controls into internal company procedures.

During the 2nd annual DIT UK trade mission to Empire FinTech Week in April 2018, the Department of International Trade (DIT) in the United Kingdom chose CUBE as one of the 15 “UK-based FinTech startups” for actively entering the US market as part of the official delegation from UK to engage with US regulators to reduce barriers to doing business.

CUBE’s current CEO Ben Richmond is a 20 year veteran in the technology sector, specializing in better leveraging unstructured data. Richmond is also the Chief Executive of the International RegTech Association (IRTA).

We could not find any details on how CUBE’s RegTech platform analysed regulatory information from their data lake to prompt compliance actions to their clients or any evidence of robust case studies.

Compliance.ai

Compliance.ai is a Silicon Valley startup founded in 2016 with around 26 employees. The company has launched a platform that they claim uses machine learning to improve search, monitoring and tracking of regulatory content relevant to financial organizations.

Compliance.ai states that the platform’s Team Edition might enable banks and other financial institutions to automate research, as well as track financial regulatory content and regulatory updates in one place. Compliance.ai also says its platform curates financial regulatory content from sources like federal and state-level regulatory agencies, executive orders, whitepapers and news media.

Leadership level executives at banks might work alongside a team from compliance.ai to help them understand their global and individual jurisdictional presence, according to the company. The platform can then be integrated with the banks existing systems and can potentially prompt compliance officers at the bank with alerts for compliance risks after cross-checking its curated database.

Below is a one-minute video from Compliance.ai giving an overview of how their platform claims it can help financial institutions:

According to the company, financial institutions might apply Compliance AI’s platform in these ways:

  • To keep up with regulatory changes by using “expert-in-the-loop” machine learning models to comb through regulatory content. The company claims Compliance.ei can automatically classify this content to find high-risk compliances and then send a suggested action to the bank’s compliance officers.
  • Compliance officers at an enterprise might choose integrate the Compliance.ai platform within an existing compliance team’s digital infrastructure to automatically collect and curate financial regulatory data. The company claims that this could insure that no new regulatory rules are being infringed upon.

In a testimonial, Illeana Falticeti, VP of Compliance at Cloud Lending Solutions said, “Managing and optimizing  time, resources and skills management are the challenges where products like Compliance.ai may help financial services players with.” She notes her experience with the platform in the video below:

In one case study, Compliance.ai claims to have worked with the Bank of Marin (Headquartered in California) to help automate the banks’ regulatory tracking processes which was previously done manually by compliance officers.

According to the case study, the bank’s compliance officers would constantly track regulatory changes from the websites or newsletters of its regulatory bodies such as the Federal Deposit Insurance Corporation (FDIC) and state regulators like the California Department of Business Oversight.

Compliance.ai claims that its platform was able to automatically identify the most relevant compliance requirements from an ocean of regulatory information from multiple state and federal sources. Although Compliance.ai claims that the Bank of Marin realized a return on investment in terms of time spent for compliance employees, no further data on the cost of the integration or its end results could be found.

Compliance.ai CEO and Co-founder Danielle Deibler is also the Co-President of the International RegTech Association (IRTA) in the Bay Area and has previously worked with mobile application development. We could not find anyone with robust experience in AI development in the executive leadership team at Compliance.ai, although according to their LinkedIn page, three employees specialize in data science and machine learning.

Text IQ

Text IQ is a San Francisco-based AI startup founded in 2014. With roughly 32 employees, the company offers risk and compliance software for enterprises, law firms and government agencies which the company claims uses machine learning to identify sensitive and compromising in big data (like internal business data records).

Text IQ offers a platform tailored for Chief Compliance Officers. The company claims it combines natural language processing with relationship analysis and aims to narrow down document sets to manageable sizes for human officials to review.

Here are a few examples of how Test IQ claims the platform can be used:

  • The chief compliance officer at a financial institution might be able to cut down the time spent in keeping track of FCPA, GDPR, anti-money laundering or insider trading risks by ‘summarizing’ only the relevant regulatory content from all the authorities into a document that can be reviewed by a human officer.
  • A consumer goods manufacturing company might be able to find systemic behaviors in employee work patterns that are in violation of the law or internal policies leading to regulatory infringement.

During our preliminary research we found no evidence of successful case studies from enterprises using the Text IQ platform specifically for regulatory compliance although there seems to be some evidence that Wendy Riggs the senior manager of eDiscovery and litigation operations at Twitter Twitter was interested in a demonstration from Text IQ for using their platform in an eDiscovery application.

Text IQ was co-founded by CEO, Apoorv Agarwal who earned a PhD in computer science from Columbia University in New York. The company also claims that over 70 percent of its team are either PhD or master’s degree holders in computer science, however, we could not confirm this through research on the company site, Linkedin or Crunchbase.

Machine Learning For Enterprise Email Filtering

Tessian (formerly CheckRecipient)

According to the General Data Protection Regulation (GDPR) regulations in Europe, enterprises can be fined up to 20 million euros or four percent of their annual global turnovers for infringing on data security laws, including instances like misaddressed or unauthorized emails.

London-based Tessian, founded in 2013 provides an enterprise email security platform which the company claims uses machine learning to help prevent sensitive emails in an enterprise from being sent to the wrong person. The 58 employee company claims their platform can potentially detect emails that may lead to data loss (example – misaddressed emails) or a data security threats (emails to unauthorized accounts).

Tessian claims that their platform can analyze historical enterprise email data (such as the records of all the incoming and outgoing emails sent by a particular team or employee) and ‘understand’ patterns in email behavior of employees (such as regular emails with sensitive information to persons external to the company) to devise security filters.

According to the company, once these patterns are recorded, the platform monitors outgoing emails of employees and can potentially spot anomalies like, “recipient looks unusual for the context of this mail,” or ‘top secret project data detected in this email.” Employees can then ensure that there are no breaches to data security more efficiently.

Abhirukt Sapru, the head of business development at Tessian, explains how the platform might help enterprises with email security in this interview with Information Security Media Group(ISMG).

Taylor Vinters, a law firm in the UK, used Tessian’s platform to ensure that the company’s data security was in alignment with the GDPR regulations which included preventing email breaches proactively.

Steve Sumner, Director of IT at Taylor Vinters, explains in the video below that the law firm needed to upgrade their email security since traditional rule-based security in Microsoft Outlook (which they previously used) was time-consuming and inefficient.

Tessian claims that Com Laude, a brand protection and corporate domain name management services provider, used the platform to implement a regulatory framework for their internal communication policies. No further details of the case study, including how long the integration process was or other quantifiable end-results, could be found.

Tessian was founded by Tim SadlerEd Bishop and Tom Adams, all of whom were graduates from Imperial College London. We were unable to find evidence of the Tessian leadership team’s robust academic or business experience with artificial intelligence in the past.

Conclusion

Our research concludes the following themes:

  • Artificial intelligence applications in RegTech are in their infancy today although regulatory compliance is ripe for automation through AI, as evidenced by the emergence of many startups and AI vendors in the space.
  • The major applications today seem to be around using predictive analytics to stress test a company’s business performance under different market conditions, automatically tracking compliance requirements and establishing an email monitoring and filtering systems.

We also took note of two themes that business leaders may be interested in:

  • Data security regulations have been steadily getting more strict and with the recent GDPR mandate in the EU, businesses can expect that data security norms might get tighter in the future.
  • AI use-cases in RegTech are still few in number and the next two to five years might see the emergence of many established AI applications – just as was seen for AI applications FinTech.

*This article first appeared on Emerj.


Interested in the impact of new technologies on regulation? Get involved at this year’s annual conference. Contact Jim McKay (jamesmckay@lawscot.org.uk) to become involved as a speaker or session moderator. 

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The implications of AI on legal regulators and how they can use it

At last year’s ICLR Annual Conference in The Hague, ICLR member came together to present on the implications of AI on legal regulators and how they might harness this technology to their advantage. Panelists drew from input from ICLR members and how their own institutions were engaging with Artificial Intelligence, as shown in the infographic below:

The presentation cover various aspects, including:

  • What is Artificial Intelligence? … And what it isn’t: Steve Wilson, Standpoint Decision Support
  • What are the Potential Risks to be Managed: Bridget Gramme, Center for Public Interest Law at the University of San Diego School of Law
  • How Legal Regulators can use AI: Crispin Passmore, Solicitors Regulation Authority
  • Getting into Artificial Intelligence: Alison Hook, Hook Tangaza

You can access the full presentation here:  ICLR Artificial Intelligence Presentation


Interested in the impact of new technologies on regulation? Get involved at this year’s annual conference. Contact Jim McKay (jamesmckay@lawscot.org.uk) to become involved as a speaker or session moderator. 

Brought to you by ICLR