By: Michael Rasmussen
GRC Analyst & Pundit at GRC 20/20 Research, LLC
Navigating risk is no small task, whether it’s staying ahead of financial crimes, managing third-party relationships, or keeping up with the constant ebb an The stakes are high, and the need for smarter, more efficient solutions has never been greater. Enter artificial intelligence (AI). As SEC Commissioner Hester M. Peirce, in her March 27, 2025 remarks at the SEC AI Roundtable, emphasized the need for a balanced and informed regulatory approach to artificial intelligence in financial services—one that fosters innovation while maintaining human oversight and ethical responsibility to protect investors and market integrity.
When it comes to risk management, It’s a transformative force that’s tackling some of the most challenging aspects of compliance and business strategy today. From detecting money laundering patterns that humans might miss to helping firms predict and manage risks before they escalate, AI is stepping up to the plate. It’s making complex problems more manageable, reducing the strain on compliance teams, and enabling businesses to stay ahead of emerging threats.
But how does it do this? Let’s dive into how AI is specifically addressing high-risk areas like Anti-Money Laundering (AML), Third-Party Risk Management (TPRM), and regulatory change management, and why it’s quickly becoming a must-have tool for businesses looking to stay secure and compliant:
- AI in Anti-Money Laundering (AML). Money laundering continues to evolve as criminals adopt more sophisticated techniques. Traditional systems often rely on rigid rule-based patterns that flag suspicious activity, leading to a high number of false positives. AI changes the game by learning from transaction data and detecting subtle patterns, making it more effective at identifying real threats. As the FinCEN rule – set to take effect in January 2026 – requires financial institutions to implement risk-based and effective AML programs, AI will play a crucial role. By automating risk assessments and focusing on priority threats, AI can help institutions meet these new regulatory expectations, ensuring that their programs are both compliant and proactive.
- AI in Third-Party Risk Management (TPRM). Managing third-party risks, such as cybersecurity threats, financial instability, or compliance violations, has always been a challenge. When manually tracking relationships with hundreds or thousands of third-party vendors, businesses risk overlooking critical issues. AI automates this process by scanning a wide range of data sources, such as financial reports, news articles, social media, and regulatory filings, providing a real-time snapshot of third-party risks. Through Natural Language Processing (NLP), AI uncovers risks like reputational damage or hidden compliance issues that would otherwise go unnoticed, enabling businesses to act proactively instead of reactively.
- AI in Regulatory Change Management. Regulatory changes come at a fast pace, and staying compliant with new rules can feel like a never-ending challenge. A I simplifies this process by scanning regulatory documents in real-time, identifying key changes, and categorizing them based on their potential impact. It helps businesses quickly understand the implications of new regulations and integrate necessary changes into their operations, reducing the risk of non-compliance. By suggesting adjustments based on previous patterns, AI ensures that businesses remain agile and up to date with minimal effort.
While AI’s impact on areas like AML, TPRM, and regulatory change management is already impressive, its reach is only expanding in these areas. As threats to firms grow more sophisticated, businesses are facing a pressing challenge: they can no longer afford to simply react to risk exposure. The game has changed, and the stakes are higher than ever. Traditional methods of risk and compliance management, though important, are often too slow to respond to the fast-moving and increasingly complex threats lurking around every corner.
Here’s where AI comes in, like a vigilant security guard on high alert, 24/7. AI doesn’t just sit back and wait for something bad to happen. It continuously scans systems for signs of unusual activity, learning from historical data to predict future threats before they even materialize. Think of it as having a tool that doesn’t just react but anticipates potential exposure, stepping in before anything catastrophic can happen. It’s the kind of foresight that helps businesses stay one step ahead in a world that’s never short of new threats.
AI’s capabilities extend into fraud detection, another area where traditional methods are beginning to fall behind. Fraudsters are getting more creative by the day, and the strategies that worked in the past are no longer enough to catch them. Fraud isn’t just about obvious, blatant scams anymore; it’s about hidden patterns that are hard to spot.
This is where AI truly shines, in predictive analytics to proactively identify risks to firms. It can analyze vast amounts of transaction data in real time, hunting down subtle anomalies that would otherwise slip through the cracks. By learning from each case, AI continually sharpens its ability to detect emerging fraud schemes, giving businesses the upper hand in the battle against financial losses. This proactive approach to fraud detection isn’t just about catching criminals, it’s about staying one step ahead, stopping fraud before it even starts.
Balancing AI’s Power with Human Expertise
We’re still at the beginning of AI’s journey in risk management, but the possibilities are huge. As AI continues to evolve, its ability to handle more complex tasks, identify nuanced risks, and predict future challenges will only improve. But even as it becomes more advanced, AI will never replace the human touch.
The key to success will be finding the right balance, leveraging AI for its strengths in processing data, recognizing patterns, and automating processes, while still relying on human expertise for critical decision-making, strategic planning, and compliance oversight.
For companies navigating high-risk areas like AML, TPRM, and regulatory change management, AI is already proving to be an invaluable tool. It’s not just about keeping up with today’s risks—it’s about preparing for tomorrow’s challenges, ensuring that businesses stay resilient, secure, and compliant in an ever-changing world.