Why Ethical AI is Non-Negotiable for Compliance in 2025

Key takeaways:

1. Ethical AI is essential for building trust and ensuring accountability with customers, auditors, and regulators.
2. ISO 42001 sets the global benchmark for responsible and auditable AI practices.
3. Proactively addressing AI risks like hallucinations and data breaches is critical for compliance and accuracy.
4. Ethical AI provides a strong competitive edge, attracting customers who value transparency and fairness.
5. A culture of compliance and expert collaboration ensures successful and responsible AI adoption.

Integrating artificial intelligence (AI) with compliance is changing how businesses operate. However, as AI adoption accelerates, so do ethical concerns surrounding its use. As this tech advances, businesses can’t just view ethical AI as a choice—it’s a non-negotiable standard for compliance, accountability, and competitive advantage. 

From protecting sensitive data to ensuring algorithmic fairness, ethical AI is at the heart of building trust among stakeholders, regulators, and customers. For compliance officers, tech-savvy accountants, and anyone using AI, understanding the ethics of AI and automation will be essential to maintaining and growing a strong business. 

This blog post dives into the significance of ethical AI, its implications for compliance, and actionable steps organizations can take to ensure ethical practices. 

Building Trust Through Compliance 

The foundation of any robust compliance program is trust. That trust comes from customers, clients, and auditors. Ethical AI strengthens this foundation by addressing risks unique to AI, including hallucinations (false or fabricated results) and algorithmic bias. Businesses that prioritize ethical AI are demonstrating their commitment to corporate responsibility and regulatory excellence. 

ISO 42001: A Game-Changer for AI Compliance 

ISO 42001, the latest global standard for ethical AI, is a pivotal milestone for businesses adopting automation responsibly. Developed to audit and assess AI practices, it ensures organizations use AI ethically, securely, and transparently. In our latest episode of Blood, Sweat, and Balance Sheets, our team dug into the importance of ethical AI and how automation will soon be a key part of compliance strategy — not a hindrance.

https://www.youtube.com/watch?v=8cHwA9h4cXM&t=6s 

"ISO 42001 is a global standard that sets the bar for ethical and responsible AI. It doesn’t just offer guidelines—it requires organizations to validate their practices through a robust, third-party audit process to ensure compliance," notes FloQast’s Senior Director of Compliance Risk & InfoSec, Vicky Levay. This certification places businesses on the cutting edge of compliance, positioning them as trustworthy allies in their industry. 

FloQast is a trailblazer in this realm, proudly earning ISO 42001 certification alongside market leaders like AWS and Anthropic. We are committed to building trust while we grow our technology, which means focusing on aligning advanced AI capabilities with strong compliance values. 

Why Ethical AI Matters More Than Ever  

AI has made a dramatic entrance across many industries by driving efficiency, lowering costs, and automating mundane workflows. But it has also introduced unique risks that demand prevention and attention. By proactively addressing these challenges, businesses can use technology to their advantage while still keeping ethics top of mind. Here’s why ethical AI matters for compliance and growth: 

1. AI and Audits 

Auditing AI systems presents new challenges, especially in industries where regulations are stringent (finance and accounting, for example). Because AI models process sensitive financial and personal data, accuracy and fairness are essential. For instance, the wrong AI tool could give outputs that lead to financial reporting errors or privacy breaches, creating potential liabilities for organizations. 

To prevent these issues, ISO 42001 mandates strict transparency, requiring organizations to document how their AI systems make decisions and give outputs. Implementing robust measures, such as logic traceability and audit-friendly integration, is foundational to gaining auditor approval. The easier it is to understand how your AI tools came to a decision, the easier it will be for auditors to sign off on the work completed. 

2. Preventing Hallucinations in AI 

A significant risk with AI, often referred to as a "hallucination," occurs when an AI confidently delivers fabricated or incorrect results. As Vicky LeVay insightfully described in our podcast episode, AI can act like an “overambitious intern.” It will give you an answer to your question, but it will do so by making up the answer or sourcing an answer from a made-up source. With ethical AI, businesses implement “human-in-the-loop” strategies, ensuring human oversight for every decision made by AI systems. 

3. Data Responsibility and Security Risks 

With sensitive customer and financial data at stake, data security is a critical ethical priority. Risks, such as prompt injections (where attackers manipulate AI prompts to extract confidential or sensitive data), highlight the urgent need for strict data protection protocols and safeguards. 

"AI in compliance isn’t just about efficiency," emphasizes Vicky LeVay. "It’s about protecting material non-public information (MNPI) and ensuring that our customers, their auditors, and regulators can trust the systems we build."

4. Competitive Edge Through Ethical Compliance 

Ethical AI isn’t just about mitigating risks—it’s a powerful competitive differentiator. Businesses that demonstrate proactive efforts to adopt ethical AI are more likely to attract customers eager for transparency and fairness in the tools they rely on — especially tools that can effectively avoid security risks. 

FloQast AI Agents, for instance, focus on auditable workflows, collaboration with compliance experts, and input from auditors. Your data is secure and transparent to only those who need to use it. 

The Path Forward for Ethical AI 

The transition to ethical AI isn’t just a technical exercise—it’s a necessary cultural one. To foster meaningful change, organizations need three key elements: 

An Eye Toward the Customer

Organizations must prioritize the needs of their customers, ensuring AI tools serve to empower rather than create friction. Listening to customer feedback and integrating compliant features tailored to their needs are key to success. Integrating AI tools will only give your business an advantage if it’s done strategically and with customers (and their security)  in mind. 

Expertise in Compliance 

Having compliance and audit professionals actively involved in the development process ensures that technology is designed to address real-world challenges. We created such an environment at FloQast through our executive team’s support. As a result, FloQast has been able to produce (and offer) AI solutions that naturally align with regulatory expectations. 

Ambition with Integrity 

Adopting ethical AI requires ambition tempered by integrity. When choosing AI vendors and third-party apps, organizations must be willing to select businesses that have invested in certifications like ISO 42001. While AI is still a relatively new technology, there are security measures and certifications that prove an AI tool’s security. Don’t underestimate the importance of aligning with a company that believes in protecting your data as much as you do.

Ethical AI is the Future of Business 

By 2025, organizations that neglect ethical AI risk falling behind—not just in compliance, but in customer trust, competitive advantage, and operational security. The businesses that succeed will be the ones integrating cutting-edge technologies with unwavering ethical standards. 

At FloQast, ethical AI isn’t just a policy—it’s a commitment. From leveraging ISO 42001 certification to empowering teams with compliance-focused AI tools, we are paving the way for a future that cares about accurate, reliable, and secure automation. 

Are you ready to future-proof your compliance strategy? Watch a quick FloQast demo to see AI Agents in action.