Deceit, shrewd manipulation and unexpected outcomes may be the bedrock on which the grand saga of Game of Thrones plays out, but it is apropos applying any (or all) of those themes to Financial Crime and it’s management. AI in FCM, is not a new phenomenon (by ‘Moorish’ digital standards) and understanding the implications of rapidly evolving AI is central to recognizing how FCM will adapt in the near and medium-term.
‘AI Winter’ (for the uninitiated) is a term used to describe a period of disillusionment with AI’s potential and the resultant trough in the hype cycle of AI application. As is typical with all novel technology, AI winter followed a period of hysterical hype and wildly manic premonitions of AI’s seemingly unlimited potential (so much so that Hollywood embraced it, albeit in a dystopian fashion, through Cameron’s Terminator and Judgment Day). In an eerily short period of time, AI is back with the full vigor and sprightliness of a misunderstood but gifted teen that simply cannot wait to show off its newly acquired kicks. So is winter coming? Will the wisdom of the Starks hold fort in a brave new world?
Chapter 1: The Digital Age
Harking back to the AI Winter of the past, the most obvious fact is that the idea of ‘digital’ was confined to academia, curious governmental agencies and the corps d’elite of the Military-Industrial-Complex. The general public was largely digitally illiterate and so were most banks and financial institutions around the world. Pivot to the modern day scenario, wherein digital is pretty much the only type of banking that millennials are aware of and FIs must increasingly look at protecting their fastest growing client base with the most relevant tools available. Financial crime shares its bedposts with any weapon that suits its agenda and unless FIs are equally nimble, they run the greatest risk of all- That of being cast into oblivion and relegated to the footnotes of a digitally distant past. In this rapidly evolving timeline, AI is the equivalent of the ‘nukes’ of the cold war era. And even if Mutually Assured Destruction (MAD) isn’t the expected outcome this time around, being armed to the teeth with AI arsenal is the best FCM strategy that FIs can hope for.
Chapter 2: Moravec’s Paradox
Moravec’s Paradox occupies center stage in AI development and consequently in our understanding of what constitutes ‘Intelligence’. The paradox demonstrates that what is often taken for granted by humans, such as evolutionary intuition honed over millions of years, recognition and generation of complex language and images etc. turn out be the tasks that flummox today’s AI. Artificial ‘Narrow’ Intelligence is remarkably good at analyzing large volumes of data, learning from multiple algorithms and choosing the most suitable for a particular scenario and applying massive computing power to complex mathematical problems. While FCM of today benefits enormously from the aforementioned ANI abilities, we must be wary of the paradox, i.e. what may be considered ‘simplistic’ from a human viewpoint, might actually present the most complex challenges for AI. As Financial crimes develop along these paradoxical fault lines, FCM must not only be ready, but positively paranoid about being blindsided by unique problems such as these. That said, the solution presently lies within the ambit of AI, and FIs must consider novel approaches to issues of this nature in order to stay ahead of the curve.
Chapter 3: Material well-being alone, is supreme
Chanakya’s Arthashastra is a singular text, both with respect to how it stays doggedly true to its core theme of cold pragmatism in matters of statesmanship, and the manner in which it reminds the reader that economic might is central to human development and welfare. Were we, by logical extension, to apply this maxim to AI, we would be well poised to understand and possibly predict future outcomes.
As we observed earlier, ‘AI Winter’ followed a period of hysterical overestimation of AI’s potential. What that translated to, in the material world, was a marked lack of enthusiasm on the part of those with deep pockets to fund its development, once it became apparent that it wasn’t quite as world changing as it was made out to be. In today’s world however, AI is no longer being developed at the fringe. It is smack in the middle of the sector (BFSI) that determines the rise and fall of technological application in the digital world. R&D is therefore well funded and the ecosystem is strongly symbiotic. Shaping the future has never been sexier or riskier than it is now. So with deep pockets funding AI research and fintech firms offering AI capabilities that challenge conventional solutions, FCM is extremely well poised to receive the windfall. And as long as the mavericks steer their vessels through choppy waters while delivering results that speak the language of currency, there is little reason to think that AI Winter Part Deux is anywhere on the horizon.
Conclusion: Creating the Future
We stand poised at a very unique confluence of technology, awareness, possibility and wherewithal. Tightening regulations and trade barriers notwithstanding, this is the most interconnected period of human existence and with it comes all the uncertainty that a new era always heralds. For the BFSI sector, its core values have always been the ability to stave off unnecessary risk and to protect and grow the wealth of its clientele. FCM powered by AI can unleash possibilities for both those core values in ways that were quite unimaginable in the past. Indeed, doomsday predictions aside, as long as the Lannisters pay their debts, the wisdom of the Starks will be held at bay.
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