IBM Offers Watson To Help Ferret Out Financial Crimes -- WSJ

By Gabriel T. Rubin Features Dow Jones Newswires

International Business Machines Corp. on Wednesday formally launched a Watson product for financial regulation, rolling out artificial-intelligence tools to help financial institutions comply with rules and detect possible financial crimes.

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The technology giant's entry into the regulatory-compliance space, where a number of firms already use AI to manage immense amounts of data, comes after it purchased financial consultancy Promontory Financial Group in September.

IBM is looking to build on the Jeopardy-winning Watson's presence in the health-care sector, where the company has used partnerships with and acquisitions of health-care providers to improve care, particularly for cancer patients.

"We were very convinced after our experience in health care that it wasn't a technology-alone solution," Alistair Rennie, general manager of Watson Financial Services, said in an interview. "You need to partner with experts who know the process, who have the expertise."

Watson's move comes as financial firms continue to shift to AI and so-called "machine learning" to manage data that must be analyzed for regulatory compliance and crime prevention.

IBM rolled out three Watson tools on Wednesday. One analyzes regulatory text to identify obligations that companies might face and help assess whether the company's compliance programs are sufficient to comply with the rules. Another assists banks in detecting suspicious customers or transactions, and a third seeks to make "big data" at financial firms more accessible to decision makers when developing new business strategies.

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Other technology firms already provide similar services. Digital Reasoning, an artificial-intelligence firm based outside Nashville, Tenn., has contracts with Nasdaq for monitoring global trading and works with Goldman Sachs Group Inc. to prevent financial misconduct by traders. The firm counts Goldman Sachs and Credit Suisse as investors, among others.

The role of these companies, said Digital Reasoning founder and president Tim Estes, is to take the huge amounts of unstructured data from their client firms and make it usable for compliance and surveillance purposes.

"All the data is there -- it's a bunch of crude oil in the ground. We're the refiners above ground," Mr. Estes said in an interview.

Unlike IBM, Digital Reasoning has less of a focus on anti-money-laundering compliance, at least for now, he added.

Mr. Rennie, of Watson Financial Services, said that clients would likely look to IBM to work on specific issues, and then over time move toward a "more holistic, end-to-end" use of Watson technology to deal with their compliance responsibilities.

Eugene Ludwig, the chief executive of Promontory and a former U.S. Comptroller of the Currency under President Bill Clinton, said the new technology would benefit regulators, too.

"Regulators should be quite cheered by this," he said in an interview, pointing to anti-money-laundering compliance as an area of where both firms and regulators would mutually benefit. "To the extent that the [suspicious activity reports] filed by institutions are more accurate and usable, that's a huge help for regulators doing their job."

To be sure, Watson and other machine-learning technologies have a long learning process as they encounter more data and unfamiliar information. Some previous Watson projects in the health sector have struggled to meet their ambitious goal of transforming cancer care.

Still, the upshot for these systems is promising, Mr. Ludwig said: "The neat thing about cognitive technologies like Watson is that they learn."

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

(END) Dow Jones Newswires

June 15, 2017 02:47 ET (06:47 GMT)