Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

AI Challenges Spot-Checking as Compliance Standard in UK Property Sector

Spot-checking case files, long used as a compliance strategy in the financial services industry, is being rendered obsolete by advances in artificial intelligence (AI). According to a report by Mortgage Solutions, AI now enables comprehensive file reviews, shifting both operational practices and regulatory expectations.

Historically, compliance teams have reviewed a sample of case files—often around 10%—due to the time and cost involved in manual checks. This approach, described as a 'risk-based' method, became standard because reviewing every file was considered financially and operationally impossible. Manual file reviews typically take from under an hour to nearly two hours per file, making 100% checks unfeasible.

However, the introduction of AI is changing this dynamic. AI systems can process and connect information across thousands of pages of data in seconds, allowing for full oversight of all case files. This technology eliminates the blind spots left by traditional spot-checking, ensuring that systemic issues, outliers, and vulnerable customers are identified immediately rather than being missed in unchecked files.

The report notes that this shift is not driven by new regulatory crackdowns or financial crises, but by the fundamental change in the economics of compliance. Under regulatory regimes such as the Financial Conduct Authority’s (FCA’s) Consumer Duty, firms are now expected to actively monitor and demonstrate positive, consistent customer outcomes across their entire business, rather than relying on partial checks.

AI does not replace human judgement but works within defined parameters to surface relevant information quickly. This allows compliance teams to focus on assessing outcomes for clients, rather than spending time searching for specific details within files.

For UK letting agents and inventory clerks, these developments signal a move towards more robust compliance processes. As technology makes comprehensive file reviews operationally viable, regulatory expectations are likely to evolve accordingly.