Fitch Ratings agency turns to AI to spot misconduct early

The Fitch credit and integrity ratings agency has partnered with French artificial intelligence (AI) start-up Sigma to improve early detection of misconduct in the financial services sector.

Sigma Partners, in which Fitch has a minority ownership stake, will help the agency evaluate risk beyond traditional financial and credit references, according to a report in the FT.

Its automated data analysis system trawls and combines data from over 30,000 sources to assess non-financial risk indicators and early warnings of financial crime.

These might include regional red flags, compromised directors, addresses that are shared between apparently legitimate businesses and sanctioned organisations, and unusual churn patterns among senior executives.

Since the 2008-09 financial crisis, ratings agencies have strived to improve their internal risk monitoring, after playing a critical and unfortunate role in misleading investors about the safety of sub-prime loans. This led to the credit crunch that helped trigger the global financial crash.

“Regulators and investors are holding banks more and more accountable and Wirecard was a real wake-up call,” Fitch’s global head of financial institutions, Marjan van der Weijden, told the FT.

“The extra information provided by Sigma’s dashboard [is] giving our analysts a tool to ask the right questions to executives and to pick up worrying trends earlier.”

In recent years, a number of banks, auditors, and accountants have turned to AI and data analysis to help identify misconduct, fraud, money-laundering, and other financial crimes.

The AI in banking market is forecast to reach a global value of $362 billion by 2027, a compound annual growth rate (CAGR) of 43 percent, according to a report published last week by Absolute Market Insights.