Adaptive AI In Banking Compliance: Leveraging Agentic AI For Real-Time KYC Verification, Anti-Money Laundering (AML) Detection, And Regulatory Intelligence

Abstract

This essay focuses on the application of adaptive AI solutions in the context of finance, and more specifically, in the domain of banking compliance. After classifying typical approaches of AI in finance and KYC, the paper progresses through two examples showing how adaptive AI can specifically contribute to banking compliance. More detailed analysis concentrates on how agentic AI is interfaced with the KYC checks of credit institutions and new offerings of FinTech start-ups and contributes to real-time AML detection based on regulated and non-regulated blockchains. The paper concludes with brief insights into regulatory intelligence and its challenges in the commonly aggregated perspective in banking regulation and supervision. In dual case studies, this essay identifies how regulatory intelligence together with adaptive AI can improve compliance techniques in allegedly regulated blockchain finance as AML-sensitive activities in the banking sector. Developing these case studies draws on the concept of agentic AI adapted to adaptive AI. Findings delineate how banking institutions can verify potentially adverse real-time know-your-customer (KYC) information on a private blockchain and payers already verified by other regulated economic sectors by checking them against real-time blacklists. It involves the use of regulatory intelligence obtained from various international sanction bodies and pooled by regulated economic sectors concerning possible terrorists and attackers. Yet, implementing such a compliance service, especially by using adaptive AI, would seriously erode the data privacy of all citizens currently verified by economic sectors as a by-product of tightening the international anti-money laundering regime. Its ethical implications hitherto have not received the necessary attention in the academic and practitioner literature. Future research implications could critically address the ethics of employing adaptive AI for compliance tasks in banking, particularly its interference with individuals' rights to have and maintain a transactional private sphere.