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From novelty to necessity: How GenAI is reshaping investment accounting

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Imagine a tool so integral to your daily routine that it becomes second nature in your professional life. Generative AI has done that for investment accounting. In just two short years, GenAI’s impact has reimagined how investment accountants interact with data, make decisions and drive financial strategies.

Today, nearly two-thirds of organizations say they regularly use GenAI in at least one aspect of their operations. Such rapid adoption makes it easy to understand why global GenAI spending is set to hit $202 billion — 32% of all AI spending — by 2028. Yet, as the tech continues to take shape and offer more ways to deliver intelligence, its rapid rise has also raised expectations for measurable, higher-level returns on investment. 

In the past year, GenAI has streamlined routine tasks such as document summarization and sifting through mountains of portfolio data to create actionable reports. Beyond these applications, GenAI is tackling more complex work: from demystifying the intricacies of reconciliation work to pioneering multi-country compliance automation. With each breakthrough, we’re eager to see what GenAI can do next — solving data puzzles within middle- and back-office operations is just the beginning.

However, integrating GenAI is a gradual process, with many investment accountants still learning to maximize their return on investment from these tools. The crux of GenAI implementation lies in how it can take very complex work that has involved many teams of experts and engineers harnessing very large datasets and build a data architecture that delivers remarkable output. Thus, the key to unlocking this next level of innovation lies in building a strong data architecture foundation.

Ensuring data integrity and accuracy

 
Much like investment accounting itself, the quality and accuracy of the data inputs into GenAI are essential to the reliability of its outputs. As we pioneer more advanced applications of GenAI, the creation of domain-specific prompts becomes crucial. They act as guardrails, ensuring models capture the granular context of queries and deliver accurate results. Before this can happen, we must ensure our data architecture is not only resilient but entirely without defects.

To prepare for a GenAI-driven future, businesses must maintain impeccable, validated and standardized investment data. Given the heightened regulatory scrutiny they operate in, investment accountants don’t have the luxury of simply writing off minor data errors. Even the smallest hallucination or inaccuracy can escalate into significant regulatory issues, reinforcing the need for rigorous data management practices. With this in mind and to ensure a smooth GenAI deployment, organizations should focus on three key aspects: 

  • Establish a data governance framework. Assigning clear responsibilities and processes is crucial. A formalized structure should define roles in data oversight, specify tasks for data quality control, and ensure compliance, all contributing to a trustworthy data environment.
  • Enhance data preparation. As the demands for GenAI evolve, so must our data management practices. Organizations must elevate their data preparation processes, such as collecting, formatting and organizing raw data into a structured format suitable for analysis. Automation and validation are critical for transforming data into analytics-ready information, quickly rooting out and addressing any anomalies.
  • Break down data silos. Despite more organizations migrating to the cloud, the challenge of unstructured data from disparate systems remains a hurdle for technology success. Centralizing a data story into “data lakes” can boost collaboration, standardize data and streamline data operations, paving the way for a successful GenAI integration.

 

Address legacy technology barriers that stunt AI overhauls

Financial organizations, especially within back-office functions, are still grappling with outdated legacy technology systems. These systems, although familiar, resist large-scale AI transformations. Internal inertia, external constraints and other reasons keep organizations from breaking free from the status quo. As a result, many organizations tiptoe into AI integrations on a piecemeal basis, hindering their ability to scale and evolve.

While modernizing systems involves complexity, the payoff can be significant. A transition to agile, interconnected systems can result in enhanced operational efficiency, a culture of continuous innovation, and a seamless data flow that’s vital for GenAI’s success. It’s about trading in the old for new ways of working that are more in sync with our dynamic digital world.

A phased approach to replacing legacy systems can minimize disruption and facilitate a smoother changeover. Additionally, fostering open collaboration between everyday users and engineering teams is essential. This partnership ensures upgrades are implemented efficiently and in a way that maximizes ROI — turning the complex task of replacing legacy systems into a rewarding journey of transformation.

Enabling strategic alignment before launch

Organizational adoption of bold technologies like GenAI can often feel like embarking on an epic expedition. The journey begins with grand visions, but can run off course due to competing priorities and misalignments between teams and executive stakeholders. A stark reminder of this is the sobering statistic that only 54% of AI projects make it from pilot to production — with even fewer delivering their intended ROI.

To navigate a successful transition, organizations must have a clearly defined outcome-centric roadmap before launching AI projects. This includes clearly outlining what GenAI can achieve in terms of use cases and what lies beyond its current reach. For instance, while GenAI can automate routine tasks and provide data-driven insights, it may not replace the need for human judgment and decision-making.

Such a roadmap should highlight milestones, pitfalls to avoid, deadlines and expected outcomes, bringing the team closer to realizing the project’s full potential using GenAI. Ultimately, the success of GenAI integration depends on strategic alignment and collaboration — ensuring communication lines are open so every team member, from the front line to decision-makers, is informed and vested in the mission.

Fulfilling the promise of GenAI

As we peer into the future, GenAI adoption within the accounting space is set to skyrocket this year and beyond. It’s natural for business leaders to feel the pressure to dive headfirst into AI initiatives. However, it’s crucial to discern between merely adding GenAI to the toolkit and harnessing its potential to general value-added outcomes. Despite GenAI’s transformative promise, it’s not simply a plug-and-play proposition.

Success depends on several pillars: robust data governance, the modernization of legacy systems and a strategy that aligns with the organization’s objectives. Keeping these considerations front and center, investment accounting organizations can rely on a sound foundation necessary for a thriving GenAI ecosystem. By doing so, they stand the best chance to gain ROI that not only fits, but also advances their organization’s strategic objectives in the short and long term.

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Accounting

In the blogs: Recovery mode

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Muni bonds and taxes; BE-10 time; a troubling history; and other highlights from our favorite tax bloggers.

Recovery mode

  • Don’t Mess with Taxes (http://dontmesswithtaxes.typepad.com/): As natural disasters continue to break records in number and severity, government agencies help a little — but in many cases, those who survived major disasters must come up with cash for repairs and recovery. Many turn to their largest pot, retirement savings. What to remind them about what federal lawmakers have done to help those who must tap tax-advantaged nest eggs.
  • Yeo & Yeo (https://www.yeoandyeo.com/resources): How victims may also qualify for additional relief, including on amended returns.
  • Current Federal Tax Developments (https://www.currentfederaltaxdevelopments.com/): A chief counsel memorandum addresses the deductibility of theft losses (under Sec. 165) for five hypothetical taxpayers who were victims of scams in 2024.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): If Congress makes muni bonds taxable, what could happen to states and cities?
  • Turbotax (https://blog.turbotax.intuit.com): If they’re asking a lot of questions about this season (and we bet they are), here’s your cheat sheet.

Getting real (estate)

  • The Tax Times (https://www.thetaxtimes.com): The IRS has new advice regarding transfer pricing adjustments for high-profit-potential intangible property.
  • CLA (https://www.claconnect.com/en/resources?pageNum=0): Lawmakers are under pressure to identify revenue offsets to finance fiscal and tax packages. One such potential offset: curtailing the business-related property tax deduction, which could have consequences for commercial real estate owners, developers and investors.
  • Tax Foundation (https://taxfoundation.org/blog): As the property tax debate continues in Kansas, two proposals recently emerged: a tight levy limit that would give voters the opportunity to approve or reject property tax increases and a proposal allowing taxpayers to protest and overturn property tax increases they disagree with, while increasing state transfers to cities and counties. Should policymakers continue doing more?
  • Institute on Taxation and Economic Policy (https://itep.org/category/blog/): Why lawmakers should improve or implement a circuit breaker program that kicks in to help alleviate the pressure property taxes put on working families’ budgets.

Reshaping obligations

  • Tax Notes (https://www.taxnotes.com/procedurally-taxing): A recent case, In re John Carr Smith, provides a straightforward application of a previous landmark case, United States v. Craft. In the latter, the decision focused on spouses owning property as tenants finding themselves unable to shake off a federal tax lien on one of the spouses. What makes Carr a “sad case” is that Mr. Carr married into the house and contributed nothing to its purchase, yet the IRS will reap a benefit from his ownership interest. 
  • Withum (https://www.withum.com/resources/): Guidance did exist on minimum investment amounts when determining whether an issuer has taken reasonable steps to verify purchasers’ accredited investor status, but further clarification has arrived from the Securities and Exchange Commission about relying on Rule 506(c) of Regulation D.
  • Virginia – U.S. Tax Talk (https://us-tax.org/about-this-us-tax-blog/): A recently leaked memorandum has revealed potential tax reform, including changes concerning foreign-earned income and the corporate income tax rate that could reshape the tax obligations of U.S. persons living abroad and those of multinational business owners.

Finding the way

  • U of I Tax School (https://taxschool.illinois.edu/blog/): How to use the Taxpayer Advocate Service taxpayer roadmap from tax prep through processing, collections, appeals and litigation.
  • Mauled Again (https://mauledagain.blogspot.com/): New bills in the Washington Senate and the Washington House look to impose a state vehicle miles-traveled tax, a different name for a mileage-based road fee.  
  • MBK (https://www.mbkcpa.com/insights): Some nonprofit clients are hesitant to use background checks on board members — a reluctance understandable, but misplaced. Why and how such clients should know their board members as completely as possible.
  • Taxjar (https:/www.taxjar.com/resources/blog): April’s sales tax due dates.
  • The National Association of Tax Professionals (https://blog.natptax.com/): This “You Make the Call” looks at Jim and Sarah, married filing a joint return in 2024. Their modified adjusted gross income was $237,000, and they completed the adoption of a child with special needs in 2024 and have qualified adoption expenses of $10,000. Is their adoption credit limited to $10,000 in 2024?
  • Taxable Talk (http://www.taxabletalk.com/): The BE-10 Survey deadline looms again for large business clients.
  • TaxProf Blog (http://taxprof.typepad.com/taxprof_blog/): A recent paper looks at Colonial America’s intertwining of taxes and slavery.

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Accounting

Scammers revive cyber schemes during tax season

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Tax scammers are exploiting the current political divide and resurrecting old websites to lure potential victims, according to a new report.

The report, released Tuesday by BforeAI, a cybersecurity company specializing in threat prevention, found cybercriminals and identity thieves reviving old internet domains, dating as far back as 2009, to fool victims this filing season. 

“Due to successful evasion techniques used by these cybercriminals, old websites with good reputations and rankings on search engines garner a sense of legitimacy among the targeted audience,” said the report. “Since security analysts generally warn people interacting with recently registered websites, old websites remain off the radar.”

Those include several websites registered using freely available platforms such as the venerable blogging service Blogspot. The fraudulent sites feature alleged “warnings” from the IRS about impending deadlines, but have giveaways such as misspellings and odd use of capital letters. BforeAI’s threat research team noticed that some of the old domains were re-registered last December right before tax season. 

Tax scam site

Scammers are also taking advantage of the current political climate in the U.S., launching websites mentioning President Donald Trump with tax-related keywords to entice users to their alleged services. One site used the keyword “trump” with “tax refund” while also offering a tax calculator. The BforeAI team also noticed cybercriminals exploiting the cryptocurrency arena through meme coin scams, including a “NoTax Coin” featuring Trump, who has launched memecoins of his own that have led to heavy losses for many investors. 

The threat researchers spotted a new tax-related service in which recently established businesses are leveraging the “gov” keyword to mislead people in search of legitimate government services. One website previously advertised a service to claim up to $32,000 in just 20 minutes, but now features an affiliate referral link and promotes a completely new business offering.

The BforeAI team also observed the use of the IRS logo to make fraudulent websites mimic the official IRS website, but with the use of different fonts and colors creating a confusing, unclear target. One such site featured the official IRS logo but was in Russian language and is probably targeting Russian nationals.

Some websites showed statements of tax payments, perhaps in an effort to lure victims into checking their statements and thereby sharing their financial data. The team also saw various phishing attempts featuring fake login and signup forms requiring users to authenticate their identities via ID.me, Google or their social media accounts.

“As we fulfill our tax obligations this season, be on the lookout for tax-related traps laid by cybercriminals,” warned the report.

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Accounting

Treasury promotes IRS whistleblowers who probed Hunter Biden

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The Treasury Department named a pair of Internal Revenue Service agents as special advisors to Treasury Secretary Scott Bessent and plans key roles for them in reforming the IRS after they complained of mistreatment under the Biden administration while investigating Hunter Biden’s taxes.

Gary Shapley and Joseph Ziegler, who were both special agents with the IRS’s Criminal Investigation division, testified in 2023 before the House Oversight Committee claiming then-President Biden’s son Hunter received preferential treatment during a tax evasion investigation, and they had been removed from the investigation after complaining to their supervisors in 2022. Biden agreed to a plea deal in 2023 on both tax and firearms charges with prosecutors, but the plea deal fell apart when it was questioned by a judge and special counsel David Weiss, who had initially agreed to the deal. Biden was later convicted in 2024 of the firearms charges, which related to lying about his drug use on an application for a handgun, and he again pleaded guilty to not paying at least $1.4 million in taxes. He was pardoned by then-President Biden shortly before leaving office in January. 

The two whistleblowers had accused prosecutors and IRS CI officials of not pushing for felony charges, allowing the statute of limitations to expire on some of the tax charges, and retaliating by removing them from the investigation. Their cause has been championed by Republicans in Congress, including Senate Judiciary Committee chairman Charles Grassley of Iowa, who sent a letter last month to Bessent commending Shapley and Ziegler’s “bravery, courage, expertise and integrity” and asking Bessent to take action to place Shapley and Ziegler in leadership positions. The promotion is a result of Grassley’s direct request.

“As I noted in my letter to Secretary Bessent last month, if we reinstate whistleblowers who have been retaliated against, it will send a clear signal that pointing out wrongdoing is an honorable thing to do,” Grassley said in a statement Tuesday. “It will help change the culture of our bureaucracy. I’m very grateful to Secretary Bessent for supporting Gary and Joe, and I have no doubt they will be a boon to the Treasury Department in their new roles. Gary Shapley and Joe Ziegler put their entire careers on the line to stand up for the truth, and instead of being thanked, the Biden administration treated them like skunks at a picnic. Far too many whistleblowers share a similar experience of retaliation. I hope today is the first of many redemption stories for whistleblowers who’ve been mistreated. By taking a stand for whistleblowers, President Trump and his cabinet are ushering in a new era of transparency and accountability.”

Bessent hailed their promotion to positions of influence in the Trump administration. “I am pleased to welcome Gary Shapley and Joseph Ziegler to the Treasury Department, where they will help us drive much-needed cultural reform within the IRS,” Bessent said in a statement. “These veteran civil servants join us to help further the agency’s focus on collections, modernization, and customer service, so we can deliver a more effective and efficient IRS experience for hardworking American taxpayers. I appreciate Senator Grassley’s efforts in Congress to support whistleblower protections in order to improve transparency, accountability and root out the culture of retaliation.”

Shapley and Ziegler are expected to transition to senior IRS leadership after their stint at the Treasury Department, according to the New York Post. They have reportedly named six IRS officials who they claim retaliated against them and asked for the officials to be disciplined in an official complaint filed with the federal Merit Systems Protection Board. In February, a federal whistleblower protection agency known as the Office of Special Counsel found the IRS had wrongly retaliated against the two men. That same month, Trump fired the head of that agency, Hampton Dellinger, prompting a short-lived court battle before he agreed to drop his appeal of the ouster.

“We are enormously grateful to Secretary Bessent, Senator Grassley, and all of the members of Congress for their leadership and trust,” Shapley and Ziegler said in a joint statement. “We have been motivated by one singular mantra: do what’s right, and do it the right way. It has not been easy, but having a clear conscience is worth the effort. We appreciate the opportunity Secretary Bessent is giving us to put our experience and firsthand knowledge to good use for the American people to eliminate waste and reform the IRS.”

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