The Risks of Relying on AI Translation for Financial Documents

AI translation is a tempting answer for financial institutions expanding globally. It’s cheap, fast, constantly improving, and can cope with the pressure of translating documents quickly. However, according to a recent report, 68% of financial firms using AI in risk and compliance have not validated their tools, a glaring oversight in critical settings. In the world of financial compliance, leveraging AI translation software without the help of human financial translation services can pose serious dangers that firms just can’t afford to take.

Why AI Translation Is Not Always Accurate Enough

While AI-powered translation has made great strides with machine learning translation and neural machine translation, it lags behind in terms of context and nuance. Financial reports are filled with technical jargon, regulatory references, and contractual language that must be exact. Misinterpretation by an AI translation tool of even one clause can lead to non-compliance or other legal risks.

For example, accounting systems often mistranslate numerical formats like decimal points or scales, an error that once caused an HSBC subsidiary to mistakenly transfer $10 million instead of $10,000. These risks don’t mean AI translation shouldn’t be used, but it should be used with smart safeguards, such as post-editing by financial language experts.

Machine Translation vs Human Translation in Compliance Contexts

When it comes to machine translation versus human translation services, financial institutions have more than just speed to consider. Human translation provides accuracy, cultural nuance, and the capacity to identify mistakes that automated translating systems miss.

A study of multilingual business reports showed AI-only translations were only 84% accurate, whereas human translations hit 99.5%, a difference that matters when contracts or regulatory content are involved. A single mistranslation in a regulated industry can break international standards or invoke costly audits. However, rather than framing this as a battle between AI and humans, it’s better viewed as a collaboration, where AI does the heavy lifting and human translators fine-tune the output.

Risks of AI Translation in Financial Disclosures and Contracts

Users of AI translation tools for disclosures, audit reports, or shareholder communications can unwittingly generate misinformation. Financial terminology is extremely sensitive; even small inaccuracies have the potential to damage brand reputation or incur regulatory fines. Machine systems are not always sensitive to situations where speed must give way to accuracy, but when paired with human expertise, their productivity can be a real asset.

The Illusion of Speed and Cost Savings

Most companies use machine translation or automatic translation in order to save time and money. But when what is produced is incorrect, it can be expensive to invest in machine translation post editing services, legal reviews, or image fixes. Machine translation automation is not a set-and-forget process when compliance comes into play.

As a risk-reduction technique, a few firms couple AI translation with editorial review from linguists. This hybrid approach succeeds if the human editor is intelligent and aggressive. Language service providers report that using the right CAT tools can cut translation errors by 90%, but this depends on human oversight. Unfortunately, too many companies assume automated translation tools with little oversight will suffice, a shortcut that can lead to steep penalties.

Conclusion

While AI translation is becoming increasingly adopted in global finance, it does not guarantee compliance. Financial messages require a level of accuracy even the best machine translation tool cannot always provide. By adding human translation or localization services to the equation, or choosing it outright, companies reduce compliance risk and protect their reputation.

Wondering how a hybrid model could save your team time and reduce risk without compromising compliance? Let’s talk. We can help you build a tailored workflow that combines the efficiency of AI translation with the precision of human expertise.