Learning regulatory compliance data for data governance in financial services industry by machine learning models

Abstract

While regulatory compliance data has been governed in the financial services industry for a long time to identify, assess, remediate and prevent risks, improving data governance (“DG”) has emerged as a new paradigm that uses machine learning models to enhance the level of data management. In the literature, there is a research gap. Machine learning models have not been extensively applied to DG processes by a) predicting data quality (“DQ”) in supervised learning and taking temporal sequences and correlations of data noise into account in DQ prediction; b) predicting DQ in unsupervised learning and learning the importance of data noise jointly with temporal sequences and correlations of data noise in DQ prediction; c) analyzing DQ prediction at a granular level; d) measuring network run-time saving in DQ prediction; and e) predicting information security compliance levels. Our main research focus is whether our ML models accurately predict DQ and information security compliance levels during DG processes of financial institutions by learning regulatory compliance data from both theoretical and experimental perspectives. We propose five machine learning models including a) a DQ prediction sequential learning model in supervised learning; b) a DQ prediction sequential learning model with an attention mechanism in unsupervised learning; c) a DQ prediction analytical model; d) a DQ prediction network efficiency improvement model; and e) an information security compliance prediction model. Experimental results demonstrate the effectiveness of these models by accurately predicting DQ in supervised learning, precisely predicting DQ in unsupervised learning, analyzing DQ prediction by divergent dimensions such as risk types and business segments, saving significant network run-time in DQ prediction for improving the network efficiency, and accurately predicting information security compliance levels. Our models strengthen DG capabilities of financial institutions by improving DQ, data risk management, bank-wide risk management, and information security based on regulatory requirements in the financial services industry including Basel Committee on Banking Supervision Standard Number 239, Australia Prudential Regulation Authority (“APRA”) Standard Number CPG 235 and APRA Standard Number CPG 234. These models are part of DG programs under the DG framework of financial institutions