It does appear that the AI plays with the FOW turned off, but I don't think it gets full intel. It's been shown that the AI doesn't invade if it doesn't have any intel on a province. This has been shown where watchtowers have been removed altogether. It may be that the AI agents can see everything on the map - this does seem obvious as they appear out of blue offering alliances to factions they have no contact with, in territories they have not scouted. Armies on the other hand function differently. It may be that they can "see" what's in a province and whom it belongs to, but cannot check building/army stack intel there without an adjacent watchtower/border fort or agent in the province. Evidence seems to point the lack of intel blocking the AI from invading altogether. This seems logical as the AI needs to know the rival faction army stack make-up before it can commit forces. If it didn't have this ability you would see many more battles with the AI sending 100 peasants on suicide invasions. This intel is also key to how the AI builds up forces on it's borders.
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