International Journal on Science and Technology

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AI-Powered Compliance Automation in Financial Services

Author(s) Manojkumar Reddy Peddamallu
Country United States
Abstract Regulatory compliance has become a defining challenge in modern banking and financial services. Institutions are increasingly burdened by regulations covering anti-money laundering (AML), know-your-customer (KYC), data privacy (GDPR, CCPA), and capital adequacy (Basel III). Traditional compliance functions rely heavily on manual review, paper-based documentation, and rule-based alert systems that generate overwhelming false positives. These methods not only slow down operations but also leave institutions vulnerable to hidden risks and regulatory penalties. This paper explores how artificial intelligence (AI)—including natural language processing (NLP), machine learning (ML), and explainable AI (XAI)—is revolutionizing compliance automation. We present an architecture that integrates NLP for parsing regulatory texts, transaction monitoring pipelines, anomaly detection models, and AI-driven dashboards for compliance officers. Case studies from leading global banks illustrate reductions in manual workloads, improved detection rates, and faster audit preparation. Key challenges such as algorithmic bias, evolving regulatory frameworks, and data governance requirements are addressed. We highlight future opportunities including blockchain-based audit trails, federated learning for cross-institutional compliance, and generative AI for regulatory simulation. The paper concludes that AI-driven compliance automation is not only reducing costs but also improving trust, accuracy, and resilience in financial services worldwide.
Keywords AI, Compliance, Automation, AML, KYC, Banking, Natural Language Processing, Explainable AI, Blockchain, RegTech.
Field Engineering
Published In Volume 16, Issue 4, October-December 2025
Published On 2025-10-25
DOI https://doi.org/10.71097/IJSAT.v16.i4.9557
Short DOI https://doi.org/hbb8fx
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