Artificial Intelligence Governance and Ethical Compliance in Islamic Banking: Integrating Responsible AI and Sharia Governance Perspectives

Abstract

The development and adoption of Artificial Intelligence (AI) technology in the banking sector has created numerous opportunities to improve operational efficiency, service quality, and decision-making processes. However, the use of AI also raises various ethical, legal, and governance challenges related to algorithm transparency, accountability, fairness, and privacy protection. These challenges are further complicated in the context of Islamic banking, as Islamic financial institutions are not only required to comply with applicable regulations but also to ensure compliance with Sharia principles and the Maqasid al-Sharia values. Although research on AI Governance and Responsible AI continues to grow, there are still limited studies integrating these two concepts with Sharia Governance to explain ethical compliance in Islamic banking. This research aims to develop and test a conceptual model that explains the relationship between AI Governance, Responsible AI, Sharia Governance, and Ethical Compliance in Islamic banking. Specifically, Responsible AI is positioned as a mediating variable explaining the influence of AI Governance on Ethical Compliance, while Sharia Governance is positioned as a moderating variable strengthening the relationship between Responsible AI and Ethical Compliance. This study used a quantitative approach with a cross-sectional survey method conducted among managerial employees, compliance officers, information technology personnel, and risk management professionals in Islamic banking in Semarang City. Data were collected through a structured questionnaire and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). This study provides theoretical contributions by integrating Stakeholder Theory, Institutional Theory, AI Governance, Responsible AI, and Sharia Governance into a single conceptual framework to explain ethical compliance in AI-based Islamic banking. Furthermore, the research findings are expected to provide practical implications for regulators, the Sharia Supervisory Board, and Artificial Intelligence Governance … (Khansa Shabihah & Erma Sri Hastuti) 69 LICS 2026 Topic: Strengthening Legal Frameworks for Combating Human Trafficking and Enhancing Protection of Women and Children banking practitioners in developing AI systems that are transparent, accountable, ethically responsible, and aligned with Sharia principles.