Banking Compliance in the Age of Smart Contracts: Rethinking 231 Model with AI and Blockchain Governance

This paper examines how banking compliance frameworks, particularly Italy’s Legislative Decree 231/2001 (MOG 231), are evolving in response to emerging technologies such as Artificial Intelligence (AI), blockchain, and smart contracts. Originally designed to regulate corporate criminal liability, MOG 231 must now address decentralized financial services—such as crypto wallets and tokenized payments—progressively integrated into traditional banking. This convergence of conventional banking and decentralized finance (DeFi) generates both opportunities and risks, demanding a reassessment of compliance, governance, and value creation models. While cryptocurrencies enable financial inclusion, microfinance, and operational efficiency, they also introduce vulnerabilities related to fraud, anonymity, and misuse by organized crime. These developments challenge legacy compliance systems to manage increasing technological and regulatory complexity. The study employs a conceptual methodology grounded in academic and regulatory literature, drawing on governance, financial regulation, and technology management. To capture the dynamic complexity of compliance adaptation, a System Dynamics approach is used, with Causal Loop Diagrams mapping interactions between compliance structures, technology adoption, performance, and risk exposure. Preliminary findings indicate that integrating AI and blockchain can enhance compliance capacity, regulatory responsiveness, and organizational resilience. However, persistent challenges—such as algorithmic accountability, smart contract enforceability, and integrating decentralized operations into centralized frameworks—suggest MOG 231 requires significant adaptation to effectively govern digitally enabled financial systems.