For financial institutions, artificial intelligence is quickly becoming essential to meet new regulatory demands. Many organizations now use AI to automate reporting and compliance. However, AI is also raising the bar for the quality of data and processes behind those reports.
“The assumption most organizations are operating under is that AI in compliance is an internal efficiency play, so faster filings, less manual reconciliation and fewer hours spent on routine tasks,” said Ryan Padget, president of IGEN, a tax compliance intelligence company that works with finance and tax leaders in highly regulated industries. “What they’re underestimating is that regulators are moving in the same direction at the same time.”
Tax authorities now use AI-powered tools to spot anomalies, so issues that once flew under the radar are detected much earlier.
“The window between when a problem occurs and when a regulator sees it is closing,” Padget said. “Organizations no longer have months to find and fix inconsistencies before an audit.”
That’s why quality data matters more than ever. AI can speed up reporting, but it can’t make up for bad records or weak controls.
“If your transaction records are incomplete, your tax classifications are inconsistent or your compliance controls have gaps, automation amplifies those problems rather than solving them,” Padget said.
Generative AI can give different answers from the same inputs, while regulatory calculations must always be consistent and defensible.
“But your answers in these high-stakes regulatory compliance areas need to be deterministic, following fixed rules to produce the same output for a given input every time, ensuring absolute predictability and defensibility,” Padget said.
Regulators in Michigan are also making it clear that using AI doesn’t change an institution’s core responsibilities.
“As a regulator and consumer protection agency, the Michigan Department of Insurance and Financial Services expects financial institutions using artificial intelligence to do so in a manner that complies with all applicable federal and state laws and regulations,” department Director Anita G. Fox said.
In January, the state department issued Bulletin 2026-03 to address how institutions use AI in decisions that impact consumers.
“The use of AI does not change an institution’s responsibility to operate in a safe, sound and fair manner or to meet its existing legal and regulatory obligations,” Fox said.
The real promise of AI isn’t just faster compliance. Its value comes from pairing automation with reliable data, good governance and controls that produce explainable results.
