IBM Watson Parks its AI Tank on Legal Compliance Lawn in New Venture

050211-A-9866B-135 A U.S. Army Abrams M1A1 tank takes a defensive position at a staging area during Ready Crucible in Germany, on Feb. 11, 2005. Over 50 tanks from the 1st Armor Division, Humvees, and support vehicles drove through more than 60 kilometers of German roadway and farmlands making Ready Crucible the largest movement of American armor in Germany since the 1980's. DoD photo by Richard Bumgardner, U.S. Army. (Released)

World-leading tech company IBM is to acquire risk and compliance business Promontory and combine it with its AI division Watson to form a new offering to the corporate sector via Watson Financial Services.

US company Promontory has around 600 staff and advises companies on compliance and risk, much as many large UK and US law firms already do. The combination with Watson and its AI capabilities will allow IBM to provide clients with a more automated approach to risk and compliance review, just as some legal AI companies have already been helping some law firms to develop similar capabilities to provide to their clients.

screen-shot-2016-09-30-at-08-55-58Although the company is not branding this as a move into law firm territory, undoubtedly it will have some impact given the increasing focus from lawyers on helping their clients with risk and regulatory compliance. Moreover, since the financial crisis of 2008 the level of investment from large corporates and banks in risk and compliance has growth massively, something that lawyers were quick to target.

It is therefore understandable why IBM is targeting this space, given that it already provides consulting services, though usually around technology adoption.

In a statement the US company said: ‘More than 20,000 new regulatory requirements were created last year alone, and the complete catalog of regulations is projected to exceed 300 million pages by 2020, rapidly outstripping the capacity of humans to keep up. Today, the cost of managing the regulatory environment represents more than 10% of all operational spending of major banks, for a total of $270 billion per year.’

The company then said why it thinks Watson’s AI capability can play a role and generate significant revenue for IBM in the risk and compliance field.

screen-shot-2016-09-30-at-08-53-47‘This is a workload ideally suited for Watson’s cognitive capabilities intended to allow financial institutions to absorb the regulatory changes, understand their obligations, and close gaps in systems and practices to address compliance requirements more quickly and efficiently,’ the company explained.

The company added that once the deal with Promontory is completed its staff will train Watson on risk and compliance issues, which will learn by continuously ingesting regulatory information as it is created and through interaction in real-world applications.

‘Promontory’s experts are unsurpassed in this field. They will teach Watson and Watson, in turn, will extend and enhance their expertise,’ IBM concluded.

The new service will offer:

  • tracking constantly changing regulatory obligations, expectations and control requirements
  • provide solutions that address specific compliance needs
  • provide financial risk modeling
  • internal surveillance
  • anti-money laundering (AML) and Know Your Customer (KYC) systems

In addition, Promontory professionals will extend IBM’s consulting offerings to help clients dramatically reduce the cost of regulatory compliance.

The planned acquisition is expected to close in late 2016.