Ethical implications of artificial intelligence in financial compliance: Balancing innovation and responsibility

Vikas Kulkarni
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Vikas Kulkarni: Vice President and Lead Software Engineer, US Bank, USA

Journal of Financial Compliance, 2025, vol. 9, issue 2, 184-198

Abstract: This paper explores the ethical implications of artificial intelligence (AI) in financial compliance, focusing on key issues such as bias, data privacy, transparency and accountability. The study aims to evaluate how AI can enhance regulatory adherence while addressing ethical challenges faced by financial institutions. A qualitative methodology was employed, including a comprehensive literature review, case study analysis of institutions such as HSBC and JPMorgan Chase and a comparative analysis of AI adoption rates and cost efficiencies. Key findings indicate that while AI improves operational efficiency and reduces compliance costs by up to 30 per cent, it also introduces risks related to algorithmic bias and data privacy violations. Realworld examples demonstrate the trade-offs between innovation and ethical responsibility, emphasising the need for balanced frameworks. The study offers actionable recommendations for policymakers and industry leaders, including investments in ethical risk management, fairness-testing frameworks and transparent AI governance practices. These findings underscore the importance of aligning AI innovations with ethical principles to foster trust, ensure equitable outcomes and maintain long-term sustainability in financial services. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.

Keywords: artificial intelligence; AI; financial compliance; AI ethics; algorithmic bias; data privacy; transparency and explainability; ethical governance; responsible AI (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jfc000:y:2025:v:9:i:2:p:184-198

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