The Specification Problem: Why AI Keeps Failing at KYC
Every fintech team building an AI-assisted KYC pipeline hits the same fork eventually: make the system rigid, and it does exactly what it's told. Make it flexible enough to use judgment, and something else breaks.
The mistake is thinking one of those settings is the fix. It isn't. Here's why.
The case for rigid.
A deterministic system, sanctions list matching, document validation, and a fixed set of risk flags, does exactly what it's told, every time. You can show an examiner precisely why it made every call it made. No drift, no surprises, full audit trail. For a lot of KYC, this is genuinely the right answer.
Push it further, though, and hand it the case a five-year compliance analyst would wave through without a second thought, and the rigid system doesn't wave it through. It can't.
What the research actually found.
Researchers at Harvard, MIT, and Johns Hopkins tested...
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