AFTAs 2024: Best AI/machine learning initiative—TCW Group

Project name: EU Securitization Regulatory & Compliance

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Initiative overview

Los Angeles-based TCW Group’s generative AI solution for EU securitization compliance automates compliance verification, enhancing efficiency and accuracy. The solution combines generative AI with a human workflow, parsing complex deal documents and setting compliance flags. It flags ambiguous sections for human review, maintains audit trails, and integrates with investment decision-making systems. With sophisticated security measures, it ensures regulatory adherence, supports better decision-making and reduces regulatory risks.

Our generative AI solution for EU securitization compliance sets a new benchmark in regulatory technology by automating complex compliance checks, enhancing accuracy, and ensuring timely adherence to evolving regulations. This innovation not only streamlines operations but also builds client trust, making it a deserving candidate for this award 

TCW Group 

The problem it solves  

TCW Group’s initiative automates the complex and invariably laborious process of ensuring compliance with the EU Securitization Regulation (Regulation (EU) 2017/2402). Traditional manual checks tend to be error-prone and inefficient. By leveraging generative AI with automated workflows, the asset manager’s solution interprets and analyzes regulatory documents, sets compliance flags, and maintains detailed audit trails. This enhances accuracy, efficiency and transparency, while reducing regulatory risks and supporting better decision-making, which makes it valuable for investment managers and other financial institutions.

The technology  

The TCW platform incorporates technologies like Python, LangChain—a framework that integrates large language models (LLMs) into applications—and an LLM-agnostic approach to automate compliance checks. It features secure document upload, AI-driven document parsing, and a sophisticated rules engine for compliance verification. The model is trained on a large dataset and tested for accuracy. Parallel processing enhances performance in multi-user environments, speeding up compliance checks. The system includes audit trails and integrates into investment workflows, ensuring regulatory adherence and operational efficiency.

Future plans

TCW Group’s decision-support engine will enhance the integration of its EU compliance flag and its investment and risk reporting platforms, achieving better straight-through processing. Future developments will focus on incorporating ongoing regulatory changes, ensuring the system adapts and maintains timely compliance. This is achieved through real-time regulatory updates and a flexible rules engine. Expanding the AI model to cover other regulatory frameworks will improve operational efficiency and increase client trust, demonstrating the asset manager’s commitment to regulatory compliance.

Why they won

Any initiative that reduces manual processing, while enhancing transparency and accuracy—especially when it comes to adhering to complex regulatory mandates—is worthy of an award. TCW Group’s Securitization Regulatory & Compliance project covers all those bases and then some. Regulatory compliance tends not to be an area where buy-side firms can reasonably expect to carve out a competitive advantage. Firms either comply with the regulations they are subject to or they don’t. 

However, in this context, TCW Group illustrates the business and operational benefits it has derived on the back of accurate and efficient compliance with the EU Securitization Regulation, which, when viewed from its clients’ perspective, is both reassuring and impressive. Client trust has never been more important for the buy side than it is right now and TCW’s project will go some way to reassuring its clients that their assets and being accurately and efficiently managed according to the appropriate regulatory framework.

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