Artificial Intelligence
27 November 2023

Understanding the Limitations of Generative AI as a Compliance Tool

Without a doubt, Generative AI (GenAI) has been the talk of the year as the most innovative tech tool. It is deemed to transform many business operations—including compliance management—and it’s here to stay. The phrase "AI won't replace humans — but humans with AI will replace humans without AI" is everywhere. But because of its novelty, it is important to understand the limitations of GenAI as a tool, particularly in compliance.

Tech innovation is great. It's often driven by a desire to meet new needs, address challenges, optimize processes, or enhance user experiences. The compliance function needs innovative solutions more than any other, because most of compliance is still done manually in spreadsheets. However, just because GenAI can take on hefty, time-consuming, labor-intensive tasks, it doesn’t mean that human expertise is no longer needed, and we can let go of the steering wheel. 

Generative AI is taking significant strides in assisting with compliance management—querying laws and regulations, summarizing regulatory information, drafting legal contracts, identifying compliance gaps and risks, etc.—but the mechanisms behind compliance management will always require human judgment. Tech innovation can create a paradigm shift in how industries manage and approach regulations, but it's not a panacea that can fully replace human professionals.

In the foreseeable future, AI is expected to serve as support for human skills rather than supplanting them, and compliance roles are evolving to become more strategic, insightful, and impactful with AI by their side.


Below, we discuss the key limitations that highlight the irreplaceable value of human compliance professionals.

Human vs Machine

Nuanced Interpretation 

While AI can process and summarize vast amounts of regulatory information, it cannot always grasp the nuanced interpretations of regulations that seasoned professionals can. Regulations often require contextual understanding and interpretation based on unique scenarios, something humans are inherently better at.

Moral and Ethical Judgments

Compliance isn't just about following the letter of the law; it often involves making ethical decisions that align with the spirit of the law. AI lacks the moral compass to make these judgments. For instance, while AI can identify potential loopholes in regulations, a human professional would weigh the ethical implications of exploiting such gaps.

Information Bias and Ambiguity

AI models are as good as the data they're trained on. If this data contains biases or inaccuracies, AI will reflect them. Human oversight is crucial to catch and rectify any biased or flawed outputs. Regulations can also be ambiguous, requiring deliberation, questioning, and negotiation with regulatory bodies. These are inherently human activities that AI can't replicate.

Catching Hallucinations

Similar to language ambiguity, language semantics and meaning are not always obvious to a machine, leading to outputs that may be factually incorrect but stated as truth, i.e. “hallucinated.” Depending on the provider, a GenAI tool may also be trained to always provide an answer, whether it has the information or not—so it will make things up. While this is good for creative work, like drafting copy, the outputs need some careful handling and verification when used for compliance. There are solutions like Reggi that provide citations as evidence of response accuracy. Having the right solution provider is key.

Adaptive Learning and Intuition

Experienced compliance professionals develop an intuition for potential risks or challenges based on their past experiences. While AI can recognize patterns in data, it can't have intuition in the same way humans do.

Foresight with Regulatory Evolution

While AI can make predictions based on data patterns, predicting how regulations might evolve based on geopolitical, economic, or societal changes is a complex endeavor that often relies on human insights.

Evolving Roles of Compliance Professionals

The roles of compliance professionals are undergoing a transformation. Instead of spending countless hours manually sifting through regulatory documents or cross-referencing compliance measures, they can now delegate these tasks to AI systems that can do it in mere seconds. 

With AI shouldering the burden of data-heavy tasks, compliance teams can spend more time on nuanced interpretation, ethical decision-making, and proactive risk management. Their roles are shifting from mere enforcers of regulatory guidelines to strategic advisors, shaping organizational strategies around evolving regulations. In this new paradigm, compliance professionals leverage AI's computational power and infuse the process with their expertise, judgment, and ethical considerations, ensuring a more balanced and efficient approach to compliance management.

To learn more about Generative AI and its real-world use cases in compliance management, read our free eBook. Download it here.

You might also be interested in:

Optimizing Risk Management: The Strategic Edge of Generative AI

Unlocking the Power of AI: Large Language Models for Regulatory Compliance