Why Compliance Is the Smartest Place to Start with Generative AI

Guest Editorial by JB Sloan, EVP of Product Management, NuArca Labs

Generative AI is generating no shortage of headlines and anxiety. For credit union IT leaders, it brings a familiar challenge: separating hype from opportunity and understanding where this emerging technology can safely and effectively be applied within your institution.

JB Sloan

With so many AI use cases floating around in underwriting, fraud detection, customer service chatbots, could regulatory compliance be one of the most promising places to start? 

Compliance is highly documented, chronically under-resourced, and critically dependent on accurate interpretation of language. These are the exact conditions where generative AI, when applied correctly, can deliver high-value results without introducing unnecessary risk.

Why Compliance Has Been So Hard to Automate

Compliance has always been a language problem. Credit unions operate under a patchwork of federal and state regulations, statutes, interpretive guidance and exam feedback. This guidance governs everything from product disclosures and branch procedures to social media ads and board governance. They are written in complex legal language, as are the internal policies and controls used to implement them. 

Historically this has relied on compliance experts bringing together disparate sources of guidance to provide answers to questions and guidance to their institutions. Automating compliance, outside of very prescriptive rules around CRA, HMDA, OFAC checks or SARS reporting has been out of the question. For most compliance functions, someone had to sift through the rules and regulations to determine what is relevant and how it applies to a given situation.

Why Generative AI Changes the Equation

Since 2017, advances in generative AI have made significant strides in natural language understanding. These models don’t just read text they comprehend it. They can identify obligations, map them against internal policies, and flag discrepancies or misalignments.

This is not a search engine. It’s not a workflow tool. It is, in effect, a highly specialized research assistant. When configured correctly and trained on the right data, a generative AI platform can:

• Extract regulatory obligations

• Compare them with internal documentation

• Identify conflicts or gaps

• Suggest remediations

• Cite sources for every insight

Why Compliance is the Right First Use Case for AI

Credit union IT leaders evaluating AI adoption should consider compliance as an ideal starting point for several reasons:

• Lower Data Risk. Compliance tasks typically do not involve personally identifiable information (PII) or member financials. That makes this domain less risky than many other areas where AI is being tested.

• Document-Driven Workflows. Compliance relies heavily on regulatory texts, policies, procedures, training materials, and enforcement actions. This creates a deep, structured corpus for generative AI to draw from.

• Audit-Ready Outputs. Regulatory accountability doesn’t go away. The best systems offer full transparency, providing citations with every AI-generated recommendation and maintaining a clear audit trail.

• Overburdened Teams. Compliance departments often operate with limited resources. Generative AI can take on the heavy lifting of reviewing documents, tracking changes, and drafting updates so human experts can focus on final decisions.

What Today’s Compliance AI Tools Can Do

Modern, purpose-built AI compliance tools can:

• Answer regulatory and policy questions with sourced responses

• Review marketing and member communications for compliance risks

• Assess internal documents and flag outdated or missing elements

• Compare regulatory requirements across states and jurisdictions

• Monitor regulatory updates and recommend policy changes

These tools do not make compliance decisions. They help your team make better, faster decisions based on trusted, contextualized information.

The Role of IT in Safe and Smart Deployment

As with any new technology, implementation matters. Two concerns rise to the top for IT leaders: hallucinations and data governance.

To mitigate these risks, IT teams should ensure the following:

• The platform uses only validated, controlled, and up to date content sources

• Outputs include citations and references

• No member data is used, accessed, or required

• Systems operate within secure, access-controlled environments

• There is full human oversight of recommendations

Tools should be configured to reflect the specific regulatory footprint, charter type, and risk posture of each institution. This alignment ensures the AI doesn’t just know the rules but also understands how your credit union applies them.

Beyond Q&A: AI Agents and Automated Testing

The next wave of capability involves what are known as AI agents. These are not just models that answer questions. They are structured workflows that use tools, logic, and document inputs to perform ongoing tasks.

For example, a credit union can create an AI agent that monitors a SharePoint directory for new flood certificates. When a file appears, the agent can evaluate the document against current policy and regulation, flag any issues, and notify the appropriate team. This creates powerful opportunities to automate repetitive compliance tasks like control testing without removing human review or oversight.

Scaling Human Expertise, Not Replacing It

Credit unions do not need AI to replace compliance professionals. They need AI to extend their reach. The regulatory burden continues to grow, and most compliance teams are already stretched thin. Generative AI offers a way to reduce manual work, improve response times, and make compliance a more proactive function.

For IT professionals, this is an ideal intersection of low data risk, high institutional need, and strong auditability. It’s a place where you can drive real efficiency gains without sacrificing governance.

If you’re considering where AI belongs in your credit union roadmap, compliance is a smart, safe, and highly effective place to start.

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JB Sloan is Executive Vice President of Product Management at NuArca Labs. He leads product strategy for NuComply, a generative AI compliance platform designed for financial institutions. JB has over 20 years of experience in financial technology and enterprise software innovation.