Saturday, June 3, 2023

Improving compliance by using artificial lawyers and computer games

Artificial intelligence is transforming our global economy and has become common-place in our homes and offices.  Gaming technology and AI can now be harnessed by businesses and organisations to both improve their legal and regulatory compliance, and manage risks.

They say that the best way to hide something is in plain sight, and thanks to our ever increasing reliance on technology and data, this is becoming increasingly simple. The digital explosion and our big data world has fuelled a growing economy, but has also increased business risk.  The ability to store data is better than ever, and we are generating exponentially larger volumes of data.  Similarly, communication is easier than it has ever been.  While this is a great facilitator, it also increases problematic risks within businesses.  With the data explosion, it has become harder to find and prevent those types of problems within a business.

Legal and regulatory risks are often hidden in data produced by corporations and their officers, which may reveal potentially illegal or problematic activity. Ultimately, it may be disclosed or seized by regulators and government authorities.

The burden placed on compliance officers is increasing as they are faced with new, fast changing risks to monitor within their businesses.  The volume of areas covered by regulation has also increased, including in areas such as data privacy and financial crime (de-regulation is becoming a rare trend).  The powers of the regulators have also increased, with enforcers being given stronger tools to identify and investigate wrongful conduct, as well as the ability to impose stricter penalties.  We see this in particular with the increasing criminalisation of offences and heavier fines.

Businesses aim to mitigate these risks by implementing compliance programmes.  Sophisticated businesses are trying to identify risks as early as possible, putting more effective strategies in place to safeguard themselves from fines, criminal sanctions, restrictions on business activity and reputational consequences. Managing risks effectively offers a competitive advantage: being more compliant than competitors gives a corporation a better and safer business position in the market.

However, compliance programmes are often ineffective and have repeatedly failed to prevent the harm they were intended to contain.Often organisations’compliance training lacks an effective monitoring process as well as guiding principles for what happens in the instance of a risk detection.  For compliance to be effective it needs to be trained properly into the fabric of the business, well perceived by staff, and enforcement monitored by the organisation (and identified by the organisation rather than the regulator).

Effective compliance demonstrates ethical credentials which are valuablein winning business and investment.Organisations that are not effectively monitoring these risks are wading through murky water. Audit and monitoring can pick up potential breaches before the damage has happened.  It also helps enforce a culture of compliance by demonstrating to employees what behaviour is required, and can mitigate fines or the severity of an issue.

This is where AI differentiates between a compliance programme that tells people what they can and can’t do, or an effective compliance regime that protects  an organisation and prevents problems.  Gamifying the training also allows for better learning and cements the desired outcome in people’sminds.  It is a more fun way to access training, and uses additional parts of the brain to help teach.

With regards to risk detection, current methodology uses e-Discovery techniques, allowing lawyers to review documents.  However, these reviews require specialist labour and are time-intensive which ultimately means they are expensive.The cost, effort and time of pro-active auditing and monitoring are usually only undertaken if a risk has already been identified (e.g. through a whistle-blower) or an investigation has begun.

Again, the use of well-trained AI offers an advantage to tackling these challenges by identifying the source of the issue and providing solutions. The speed and consistency of AI allows large volumes of data to be processed at speed, enablingquick risk identificationand ensuring compliance to specific regulatory requirements.

DLA Piper, for instance, has developed the DLA Project Simulator (DPS) and Aiscension.

DLA Piper has approachedalternative methods of providing training to business teams by using gaming technology, with the DPS.  It replicates real incidences of risk and project distress using a sophisticated algorithm derived from gaming technology.  The simulator enables participants to develop a better understanding of critical business and stakeholder interdependencies, while supporting customer focus and market orientation in a risk-free learning environment. It allows individuals to immerse themselves in experiential learning.

Aiscension is DLA Piper’s AI solution that can quickly audit structured and unstructured corporate data to detect cartel risks.  Aiscension harnesses specially lawyer-trained AI (based onneural-networks and deep  learning) to detect legal and regulatory risks related to potential cartel activity. With a global team of international lawyers who spent years developing and training the AI to spot the main forms of anti-competitive conduct (i.e. price fixing, market sharing, bid rigging and collective boycotts), Aiscension augments legal audits to increase their speed, cost and accuracy.

Using gaming techniques can ensure staff are better trained to understand risks and deal with them accordingly.  Using AI as an audit tool can enable businesses to audit and monitor large volumes of data within their organisation to detect risks or patterns and even prevent problems.  By training staff well and implementing appropriate monitoring tools, compliance regimes can be effective and help support the business in the modern world.