Germany’s BaFin Turns to AI to Detect Market Misconduct

The financial regulator of Germany BaFin implements artificial intelligence to boost its market surveillance functions and fight financial system abuses according to President Mark Branson.

BaFin implemented AI technology into its alert and market analysis systems during the previous year after facing criticism for missing Wirecard fraud. The system has achieved better results according to Branson who spoke at the conference about the expanding role of technology in financial regulation.

The implementation of AI technology has elevated the probability of detecting market abuse which creates a more challenging environment for German securities manipulators. The chances of getting caught have reached their highest point and German penalties remain substantial according to Branson.

BaFin implemented AI systems to enhance its oversight capabilities while working to restore its reputation following the Wirecard scandal which revealed a major accounting fraud that destroyed the fintech firm in 2020.

The leadership changes at BaFin have been followed by increased powers to detect and investigate wrongdoing since the agency gained new authorities. The regulator views advanced technology as its main tool for modernizing its methods and preventing financial crimes according to Branson.

Market participants together with compliance teams will monitor how AI transforms BaFin's enforcement strategies while assessing if this development will influence other European regulatory bodies.