Paper: arXiv 2609.27632

Authors: Walter Kurz, Reinhard Magg

Abstract

We present a compliance-first architecture for AI in regulated finance that treats regulation as an orientation layer rather than a deterministic ruleset. A matrix of regulatory intent and exposure provides a compact classification handle, which a governed policy compiler then maps into concrete prohibitions, obligations and runtime budgets. Prohibitions constrain feasibility and block externalisation, while obligations extend tasks with artefacts that must meet explicit admissibility criteria. Committee activation remains policy-driven and proportionate, preserving efficiency while ensuring supervisory oversight. Evidence, decisions and reason codes are bound to a permissioned DAG with deterministic timestamping, enabling replay, provenance checks and clear attribution of failure. Clause-level legal indexing with effective dates and capability-based agent routing ensure portability across DACH and the wider EU. The result is assurance by construction: compliance is embedded in execution and verifiable by auditors without sacrificing proportionality or transparency.

Complexity vs Empirical Score

  • Math Complexity: 3.0/10
  • Empirical Rigor: 2.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: This paper presents a novel conceptual framework for compliant AI in finance, focusing on architectural design rather than mathematical models or empirical validation. While the ideas are innovative and well-articulated, there’s a lack of concrete mathematical derivations or empirical backtesting to support the proposed architecture’s effectiveness. The paper outlines a system design but doesn’t provide details on implementation or data for replication.

Research Flowchart

  flowchart TD
    A[Research Goal: Compliant AI in Regulated Finance] --> B{Compliance-first Architecture Design};
    B --> C[Inputs: Regulatory Intent & Exposure Matrix, Legal Indexes];
    C --> D{Computational Processes: Governed Policy Compiler, Permissioned DAG};
    D --> E[Outcomes: Assurance by Construction, Verifiable Compliance];