If bots can perform a repetitive task at a bank, they should, freeing people to do the thinking that only they can do. That's the premise behind a regulatory-inquiries automation project at Morgan Stanley, the
It's also a trend finding footholds within banks around the world as executives look to automate the mindless parts of compliance, allowing both job reassignments and more time for compliance staffers to think about finding and addressing risks.
As bankers spend more and more money on AI, automation is one of the areas where some are seeing a positive return. Fifteen percent of bankers recently surveyed by American Banker's research team said their investments in AI for task automation were paying off — but only one-third said those returns were at or more than the level they expected.
The project fits within Morgan Stanley's overarching plans for "
Turning a process from manual to automated
The idea for the project germinated in 2021, when Morgan Stanley bought asset manager Eaton Vance. After the acquisition, Morgan Stanley staffers dissected the technology that Eaton Vance was using, to see if any of it could be repurposed for the firm as a whole. As part of this tech-stack teardown, they noticed an automated process responding to what are known as "blue sheet" inquiries, inbound requests from regulators asking about a particular transaction or trading pattern.
"We wanted to go back and look at the broader Morgan Stanley, where it's materially more complex," Boustead said.
His team decided to design a similar automation for regulatory inquiries, starting with a question about stock trading. The first step, in 2023, was to sit down with the compliance analysts doing the work to understand how they moved the inquiries through the system. It wasn't a uniform workflow, the tech staffers discovered.
"When you have multiple humans working in the same process, they develop their own ways of working and you end up with multiple iterations of the same process," Boustead said, requiring the team to map out a standardized path for the bot to follow.
Boustead has a team of about 10 people, based in New York City with engineers and client-enablement staffers in Glasgow, Scotland; a handful worked on this project, he said. To do the actual programming, Boustead's team worked with the bank's internal automation center of excellence, which helped them implement an outside vendor's process-automation software.
"Where you can remove humans from processes that don't require human reasoning, there's clearly less margin for human error," Boustead said. "Being able to apply automated quality control at the end is also a benefit of using machines."
Large vs. small banks
Morgan Stanley's story is playing out across the universe of large banks, especially on Wall Street. But the promise of process automation is not yet coming true for many community banks. That's because they often are still beholden to their banking-core providers for access to technology, said Claude Hanley, a partner at Capital Performance Group who advises financial institutions.
It's also a matter of prioritizing spending, since smaller banks have tighter tech budgets, and getting senior sponsors to speak up for these projects when money is getting allocated. But automation is an imperative for risk management functions within community banks, because they can't afford to keep spending on compliance staffers.
"These banks have to become more efficient on the compliance end because they're spending it in other areas and front-office staff is getting more expensive," Hanley said. "They're trying to reduce expenses in the non-
Will automating manual reviews lead to fewer jobs for compliance analysts? Almost certainly yes, according to Amias Gerety, a partner who runs U.S. investments at fintech venture capital firm QED Investors. But it should also enable the compliance department's human staffers to spend more time evaluating where the bank is open to fraud, money laundering, or other risks.
"Most skilled compliance people are deeply frustrated because of all the rote work they have to do," Gerry said. "They very rarely have time to do the kind of thinking and analysis that the bank is actually paying them to be experts in."
Why regtech is getting funded
While business process automation has been around for a generation, what's different now is the growing use of AI to help with tasks that previously weren't able to be automated. "There is a breakthrough associated with AI and automation because what makes automation hard is the thousands upon thousands of potential edge cases that are constantly breaking your automations," Gerety said. "What AI is able to do is to process those with really high fidelity and keep you on the automated path."
For fintech investors, who are betting on which types of companies will yield bank partnerships and, ideally, high-dollar exits, technology to address banks' regulatory, risk and compliance needs — "regtech" — is a growing area of focus.
"I do think regulation and compliance is one of the most exciting areas for projects like this because there's a lot of semi-structured data, it is relatively fault-tolerant, and the work product is almost always some written memo or some checklist," Gerety said.
That's where automation adds the most value. It's making life easier for bankers, and giving technologists plenty of areas to tackle.
"I think we have capabilities now the likes of which five years ago we wouldn't even have dreamed possible," Boustead said.
