Agentic AI with retrieval-augmented generation for automated compliance assistance in finance

Pandey, Varun (2025) Agentic AI with retrieval-augmented generation for automated compliance assistance in finance. International Journal of Science and Research Archive, 15 (2). pp. 1620-1631. ISSN 2582-8185

Maintaining compliance with complex Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations is a resource-intensive challenge for financial institutions. This paper presents an agentic AI approach that leverages Retrieval-Augmented Generation (RAG) to automate and enhance compliance research and decision-making. We define the inefficiencies in current U.S. KYC/AML compliance workflows – including lengthy onboarding times and costly manual processes – as motivation for a more dynamic solution. We then introduce an autonomous agent framework, implemented with LangChain, that integrates a RAG pipeline to perform contextual reasoning over regulatory knowledge bases. The technical architecture is detailed with an emphasis on the agent’s planning and tool use capabilities, and the RAG components for knowledge base construction (using U.S. regulations such as FinCEN guidance, Code of Federal Regulations (CFR) provisions, and OFAC sanctions data), transformer-based embedding and indexing, vector retrieval, and LLM-driven answer generation. We demonstrate how this agent can handle compliance queries (e.g., customer due diligence requirements and detection of transaction structuring) in a simulated proof-of-concept. We discuss key advantages of this approach over traditional rule-based or static NLP systems – notably greater adaptability to changing regulations, improved traceability via source citations, and higher precision in complex scenario handling. Finally, we address ethical considerations (hallucination risk, ensuring regulatory accuracy, and model governance) and explore practical applications such as automated audit support, compliance report drafting, and future directions including real-time monitoring and multimodal compliance agents.