Artificial intelligence assistant for third-party risk management

Michael Berman (left), founder and CEO of Ncontracts, and Ginger Devine (right), senior vice president and senior chief risk officer of Ncontracts client citizens First Bank. Berman said of his company’s artificial intelligence assistant used to review legal agreements.

For bank executives negotiating contracts with new and existing fintech vendors, it is critical to scrutinize the terms. But as the list of partners grows, the task of analyzing each contract for compliance with current guidelines and continuously monitoring them can become tedious.

Meeting the ever-changing standards of regulators is a necessary cost of doing business for both parties. Fintech company and financial institutions. bank and credit union Review each third party you work with accordingly to avoid the possibility of any lapses in risk management.

Ncontracts, a Brentwood, Tenn.-based risk management software company, has spent the past year training its new Ntelligent Contracts Assistant by providing it with vendor contracts with financial institutions and letting it learn. Key terms like “notification permissions” help automate the review process. and “business continuity.” The product debuted last month.

The assistant uses optical character recognition to scan one word at a time and entity extraction to isolate terms like price changes and renewal dates. It then uses proprietary models powered by generative artificial intelligence to create comprehensive scores and summaries that show how well—or how poorly—the protocol complies with regulatory requirements.

Organizations large and small may “have hundreds of suppliers, so being able to automatically process that information and identify any anomalies is a much more efficient use of time than manually reading every agreement,” said founder Michael Berman, CEO of Ncontracts .

Berman emphasized that the tool, which is available as part of the company’s third-party vendor platform hosted on Microsoft Azure, is not intended to replace attorneys but is an add-on product for conducting preliminary checks on contracts and identifying problem areas early on. In conversation.

“There is a way to preliminary operationalize the agreement through tools [like the Ntelligent Contracts Assistant] And make sure you check all the boxes on regulatory issues before you spend thousands of dollars with a law firm, which is very useful because no one wants to spend all that time and money with outside counsel to understand the vendor without everything in place,” Berman said. “This will really put financial institutions in the driver’s seat to understand those controls early in the process. “

along with Cybersecurity vulnerabilities surge and other third-party issues across the banking industry last year, officials at the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency June final guidance Detail appropriate steps for overseeing relationships with external vendors.

“As part of sound risk management, each banking organization has the responsibility to analyze the risks associated with each third-party relationship and evaluate the Adjust its risk management processes and the nature of its third-party relationships,” the guidance said.

Organizations hit by consent order over their fintech ties include one with $3.2 billion in assets blue ridge bank Located in Martinsville, Virginia, the city has been moving fintech partners to Resolve compliance deficiencies in its banking-as-a-service relationship.

Ginger Devine, senior vice president and senior risk officer at Citizens First Bank in The Villages, Florida, was looking for help managing vendor relationships when she started working with Ncontracts more than five years ago.

“The challenge we face is to process all information related to suppliers, effectively obtain due diligence documents, and conduct risk assessments appropriate to the supplier’s risk level. [posed to] We then coordinate with suppliers on an ongoing basis while everything is changing,” Devine said.

The $3.7 billion bank uses a variety of products on the Nvendor platform to manage internal and external audits, conduct customized risk assessments, stay abreast of relevant regulatory changes, and more. As the bank continued to expand, contracts became more complex, leading executives to explore the potential benefits of Ncontract Assistant.

Tools like this ‘are valuable for all of us’ [risk-oriented] In these roles, we need to have a good understanding of what’s going on across the board because we can’t be experts on everything,” Devine said.

Ncontracts is one of a number of vendors that have recently begun offering AI-powered contract assistants, such as New York-based VerifAI by SpotDraft and in Bellevue, Washington. Icertis’ Contract Intelligence Co-Pilot Entered the market in the middle of last year.

While interest in artificial intelligence applications in banking continues to grow, federal agencies are taking a closer look at both Qualified AI model developers and organizations that use them follow President Biden’s Executive Orders Monitor possible risks in October. Regulators remain certain Current legislation and safeguards are sufficient to prevent such risks from affecting individual consumers as well as the financial system.

James McPhillips, a partner at the New York-based law firm, said that on an institutional basis, this means establishing a “robust governance framework” before using any AI tools and “ensuring appropriate due diligence, to better understand its scope” Clifford Chance.

“Like any financial institution that must analyze its third-party relationships, especially those that are critical, adopt a due diligence process and implement strong governance processes around the use of third parties. [those tools] That’s really what all banks are setting up and doing right now,” McPhillips said.

Executives seeking outside help to address these gaps must remain committed to addressing the root causes of the problems rather than adopting products as temporary solutions.

Gilles Ubaghs, business banking and payments strategy advisor at Datos Insights, said: “Perhaps most importantly, banks and all industries should not rely on technology to eventually be here tomorrow to meet the challenges it poses today. .”

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