Compliance is becoming increasingly costly for financial institutions. According to a recent Opinion poll76% of monetary services firms increased their compliance spending from 2022 to 2023, with most blaming recent Laws.
The costs of compliance Averaging With expenses today hovering around $10,000 per worker, many corporations are in search of ways to chop expenses without running afoul of regulators. Entrepreneurs Nir Laznik and Eyal Peleg say they've found an answer — which, as is the trend, is powered by generative AI.
Laznik and Peleg founded Sedrican AI-powered platform designed to assist financial institutions implement compliance rules and flag potential issues. Before Sedric, Laznik led several startups, including a photograph kiosk software company, while Peleg spent nearly eight years at Intel's AI and machine learning organization.
“We recognized that mid-sized corporations were facing disproportionate pressure and banks were facing recent challenges,” said Laznik. “We knew that rapid advances in AI could solve these problems in a very recent way. This combination of things led us to develop Sedric.”
Sedric's AI acts as a form of overseer, monitoring the workforce's outgoing and incoming calls, chats, emails, direct messages and easy messages, and attempts to flag compliance issues (similar to failed disclosures, missed steps and misconduct) as they arise. Sedric can mechanically “defuse” issues and, in lots of cases, offer coaching to employees who violate regulations, Laznik claims.
“This technology gives compliance officers a holistic view of their customer touchpoints across multiple channels and enables them to quickly and efficiently flag deviations from established compliance policies and guidelines,” said Laznik. “Our platform covers your complete compliance lifecycle, from policy setting to enforcement, remediation and auditing.”
Such in-depth monitoring may sound a little bit intrusive – not least because Sedric “scores” interactions per worker based on whether or not they comply with company policies. But for higher or worse, U.S. state and federal policies give wide discretion for corporations that monitor their employees, so long as they’re reasonably transparent about it.
In addition, some federal regulations apply – specifically regulations on insider trading, collusion and the disclosure of certain earnings documents – mandate that financial institutions closely monitor their employees of their interactions with customers and the broader market. This anticipate State laws similar to those in New York and Connecticut that impose additional requirements on employers who conduct workforce monitoring.
I asked Laznik about the opportunity of bias in Sedric's AI, on condition that the AI is more likely to monitor communications from employees with a wide selection of backgrounds. Biased AI can result in discrimination depending on where and the way it’s used – whether intentional or not.
Studies have shown that some AIs trained to detect toxicity find expressions in African-American Vernacular English, the informal grammar utilized by some black Americans, to be disproportionately “toxic.” Other studies have proven how speech recognition systems mistranscribe audio data from black speakers more often than from white speakers.
Laznik says Sedric uses “fine-tuned models” trained on “proprietary datasets curated and validated in collaboration with industry experts” to attenuate bias. The company also monitors performance dips in deployed models and retrains models when essential.
“Our platform allows customers to supply direct feedback through various annotation inputs, that are then reviewed by compliance teams and used for retraining or integrated into the prediction process,” he added. “This ensures that our models grow to be increasingly tailored to every customer.”
To protect the privacy and security of shoppers and employees, Sedric allows corporations to configure where their data is stored and implement controls that redact (or at the least try to redact) personally identifiable information.
“At Sedric, we designed our platform with compliance and security at its core,” said Lazink. “Organizations can set their very own retention policies and compliance guidelines in keeping with their internal policies and specific regulations.”
Sedric also offers tools to help call center agents with phone conversations with customers and has “a whole lot” of paying compliance officers and company clients within the U.S. and Europe, in keeping with Laznik.
Sales have increased fivefold within the last 12 months – but Laznik didn’t want to provide more precise figures.
“For small and medium-sized businesses, we provide a normal solution and for giant enterprises and banks, we provide a hybrid model with tailored customizations,” said Lazink. “Our deal with the particular needs of monetary institutions, combined with our proprietary library of pre-trained, regulatory-inspired models that will also be customized to fulfill the unique requirements of every organization, sets us apart available in the market.”
Targeting financial customers and use cases seems to have paid off for Sedric, setting the corporate aside from workplace monitoring competitors similar to Fairwords, Shield, Erudit and Aware. It is a crowded – and often controversial — market, but investors still see some opportunity, especially as AI becomes more integrated into a majority of these tools.
Case in point: Foundation Capital seemed pleased with Sedric's progress to this point, leading an $18.5 million Series A investment within the four-year-old company that also included Amex Ventures. The recent money will go toward “significantly” expanding the corporate's go-to-market and R&D teams in New York and Tel Aviv, Lazink said, bringing New York-based Sedric's total raised to $22 million.
Sedric plans to double his workforce in the subsequent 12 months.
