When Regulation Becomes Code

Regulatory Growth and Burden

• Federal rules and regulations have expanded from 10,000 in 1970 to 50,000 currently, a trend mirrored by state-level regulations.
• Compliance currently consumes up to 15% of staff at large banks, making "compliance officers" the fourth fastest-growing job in the U.S. over the last 20 years.
• Existing workflows rely on brittle tools and manual research, creating systemic risks exemplified by TD Bank's $3 billion fine for failing to monitor tens of thousands of anti-money laundering alerts.

AI as the Solution: "Regulation as Code"

• Generative AI is positioned to transform regulation from manual text interpretation into executable "code" by ingesting complex documents (e.g., the 400-page SEC marketing rule) to apply judgment.
• Implementation Model:
  • Co-pilot Approach: AI augments human officers rather than replacing them, reducing research-heavy tasks from several hours to five minutes.
  • Hallucination Mitigation: Companies prevent AI errors by "showing their work" (providing audit trails of checks) and fine-tuning models on specific regulatory datasets.
  • Legacy Replacement: New AI-first tools are achieving 10x performance improvements over legacy systems (e.g., Sardine replacing Actimize), accelerating rip-and-replace cycles.

Market Dynamics and Adoption

• Sales cycles are shortening rapidly as Chief Compliance Officers and BSA officers actively seek solutions for acute pain points.
• Buyers are increasingly open to new tools due to the sheer scale of compliance burdens, with early-stage companies achieving high Annual Contract Values (ACVs).

Forward-Looking Priorities for 2025

• High-Impact Modernization: Focus on replacing "systems of record" where AI delivers infinite improvement, specifically in small business lending where SBA loan documentation exceeds 1,000 pages and average approval times are 90 days.
• Task Automation: Targeting areas requiring dozens of full-time employees for manual processing, enabling a shift toward strategic work via AI co-pilots.

Economic Impact on Consumers

• Reducing regulatory friction lowers barriers for new entrants (e.g., Robinhood, Chime), driving competition that results in free trading and free checking accounts.
• Streamlined compliance reduces hidden consumer costs by speeding up loan approvals, modifications, and mortgage servicing decisions that are currently bottlenecked by manual interpretation of complex guides.