Our 3 Key Take-away's
Current compliance work is characterized by a high proportion of manual processes, most of which are not continuous but event-driven (e.g., audits). It is therefore often perceived as a bottleneck.
Some compliance work can and should be automated. The resulting processes are continuous and transparent, allowing specialized resources to focus on more value-adding processes.
Automating processes delivers even more advantages. Digitizing previously manual processes enables them to be embedded in existing workflows and downstream processes (e.g., ticketing systems).
Introduction – Resource-intensive compliance under regulatory pressure
Regulatory pressure on financial institutions in Germany and across Europe is increasing noticeably—DORA, MiCA, EU AI Act, to name just a few. This trend is being driven by factors such as increasing cybersecurity threats, rapid advances in artificial intelligence, and ongoing efforts to stabilize financial markets. As a result, companies are facing ever-growing demands to identify regulatory changes early on, analyze them, and integrate them into their processes.
But that is precisely where the challenge lies. In many companies, compliance processes are highly manual, built up over time, and not very transparent. The regulatory framework is complex and dynamic, while internal processes are often fragmented and have been developed over many years by different specialists. This not only makes internal coordination and communication difficult, but also regularly leads to bottlenecks, especially when short-term events such as audits or the implementation of new requirements arise.
As a result, the compliance function of a financial institution is often perceived as a barrier, a cost center, or even a bottleneck—even though it should really be the foundation for a future-proof, compliant business model. Most stakeholders realize that a way must be found to break out of this reactive role and move toward a proactive, digitally supported, and strategically embedded compliance function.
The wake-up call – Preparing for the audit
The announcement of a regulatory audit does not come as a complete surprise – but it still triggers a flurry of activity within the organization and little confidence. It quickly becomes clear that the compliance function is not prepared for an event of this magnitude, either in terms of personnel or structure. The decision to bring in external consultants seems inevitable – but even this step costs valuable time. Weeks pass before the mandate is issued, and more weeks before the consulting team is fully operational.
Although the initial consulting phase is often offered at moderate rates, the size of the team alone incurs significant costs. The start of the project is characterized by uncertainty and a lack of overview: Where do we stand? Who is working on what? After about two weeks, a consolidated picture of the situation emerges – prioritized corrective efforts follow shortly thereafter. However, the time remaining to implement essential measures is limited – structural weaknesses can hardly be remedied sustainably under pressure and in the short period between the announcement of the audit and its start.
It is followed by the audit, which identifies any deficiencies with regard to regulatory requirements (findings) and thus further corrective measures. Once the intensive audit and remediation phase has been completed, the external team leaves the company. With them, much of the overview, structural transparency, and specific know-how that has been built up is lost. The risk of another reactive state of emergency during the next audit remains unaddressed. The need for continuously monitored processes that provide transparency about the compliance status at all times and enable ongoing processing of identified weaknesses is clear—regardless of external events.
Automation – Experts focus on added value rather than analysis
To escape the cycle of short-term reactions, dependence on external resources, and inefficient ad hoc solutions, there is no way around automating central compliance processes. A core component of such a solution is a system that ensures at least three types of regulatory checks:
Consistency between internal compliance texts and the regulatory framework – i.e., consistency with external requirements.
Consistency of content between internal documents, even across different reference levels.
Checking the completeness of internal regulations against regulatory requirements.
This system is partially automated: validations are performed automatically, while the final check is still carried out by compliance experts. The transparency of the system is particularly important: every decision is documented in a traceable manner, including its regulatory basis and the associated decision-making process. This means that the system is not a black box, but a reliable partner for the compliance function. The automated processes are always executed when the regulatory basis changes or when new or amended internal compliance texts are added.
The resulting partial automation allows valuable human resources to be deployed where they create the greatest long-term added value—in building a future-proof, proactive compliance structure.
The foundation – AI methods and technical modeling
Implementing a semi-automated compliance check requires more than just technological infrastructure—it demands a deep understanding of both the regulatory logic and the technological tools used. To realize such a solution, the technical components must be specifically supplemented with the regulatory logic and its structured representation.
The foundation is formed by the use of current large language models (LLMs) embedded in suitable retrieval-augmented generation architectures (RAG). Combined with structured modeling of the database, this results in a highly capable system. Recent advances in the quality, consistency, and structuring of text generation by LLMs make it possible for the first time to analyze compliance-relevant information with a high degree of precision and accuracy. RAG architectures ensure that the regulatory basis used remains verifiable at all times in terms of timeliness and correctness. The underlying data structure, in turn, enables control over the completeness of the regulatory assessment basis.
The result is reliable, automated compliance support – reproducible, available at any time (even at night or on weekends), with responses within seconds. In addition to analyzing the current compliance status, the system serves as a sparring partner for drafting new texts or for ad hoc checks of compliance with new regulatory requirements.
Further potential – More than automation
Automation in the compliance function means much more than just increasing efficiency or saving resources. It marks the transition from a manually managed, difficult-to-access process to a digitized, system-supported function characterized by transparency, accessibility, and traceability.
Digitizing the compliance assessment process means that the entire process flow is recorded in a structured manner and systematically documented. The resulting information, such as the current compliance status, can be visualized in real time via a dashboard. This makes the status traceable at all times – even for non-specialized personnel. In addition, the information, which is now digital, can be integrated into existing company systems, such as ticketing or workflow platforms. This makes the open compliance workload visible and documents its progress, allowing it to be managed. Initial inquiries about regulatory requirements or context-related responsibilities can be handled via self-service functions, significantly reducing the workload for the compliance team.
Overall, the communication overhead that previously had to be handled in addition to technical work is significantly reduced. At the same time, the entire compliance management process becomes more predictable and transparent. As a result, compliance becomes not only more efficient, but also strategically controllable, significantly reducing the risk of short-term reactions in exceptional situations.
The transformed organization – What happens in the long term
The compliance function is increasingly evolving from a purely controlling body to a proactive support unit. Automation frees up resources that can be targeted at structural and long-term solutions to recurring problems.
Standardized, transparent processes with clear responsibilities and measurable progress not only create efficiency, but also trust within the organization.
This forms the basis for the continuous development of compliance processes. In the long term, this will open up new opportunities for strategic control, effective risk prevention, and the strengthening of a sustainable, compliant corporate culture.
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