Investing in Norm Ai to Transform Regulatory Compliance with Generative AI

Across the increasingly complex global economy, regulatory compliance costs are on the rise. Over the last 50 years, the number of restrictive words in the U.S. Code of Federal Regulations has grown from 400,000 to over 1 million, and the average U.S. firm today spends between 1.3-3.3% of its total wage bill on compliance. Within the financial services industry, a 2020 survey found that one-third of firms had allocated at least 5% of their annual budgets to regulatory compliance.

One reason for these high costs is the manual nature of current compliance workflows, coupled with the continuously evolving and complex nature of regulation (e.g., the US has several different regulators for different types of financial products, sometimes at the state level). Mapping internal compliance review workflows to shifting regulatory obligations can be subjective and generally requires expert judgment, often leaving bank compliance teams scrambling to stay ahead of the changes. This can delay adherence to new regulations, slowing down efforts to go to market and increasing the risk of human errors and fines.

Meanwhile, generative AI (GenAI) is transforming myriad business processes, making everything from customer service to software development faster and more efficient by training large language models (LLMs) to perform complex tasks once achievable only by humans.

Now, one cutting-edge startup is bringing the scale, efficiency and accuracy of GenAI to bear on regulatory compliance: Norm Ai, the newest member of the Citi Ventures portfolio.

Launched out of stealth in late January 2024, Norm Ai (Norm) leverages large language models (LLMs) to convert regulations into what it calls “Regulatory AI Agents”: executable computer programs that understand the regulation’s full scope and can make immediate regulatory compliance determinations, undertake complex multi-step tasks and provide actionable feedback to enterprise users. Norm users can thus delegate tasks to its Agents while overseeing and validating the work, helping businesses move faster while remaining compliant and reducing costs. While the AI Agents currently work primarily alongside humans to deliver proactive compliance, Norm expects that they will one day be able to do so autonomously. Norm also tracks and anticipates future regulatory developments.

This preparation for an AI-driven future is one of many elements of Norm Ai’s product and business model that differentiate it from both legacy solutions and other next-gen players competing for the compliance automation market. Its other industry-leading facets include:

1. Composable and scalable architecture – Norm Ai takes a unique and effective approach to orchestrating its AI Agents on vast sets of complex regulations: Norm builds software/AI modules for so-called “compliance workflow archetypes,” which allows the company to apply its proprietary tech to a wide range of regulations and industries. Norm Agents are currently focused on several key U.S. laws and regulations, and the company is adding more at increasing speed — accelerating toward its goal of automating regulatory compliance determinations for all actions taken by both humans and AI agents across all industries and business settings.
2. Proprietary data sets and situational analysis – In addition to regulations themselves, Norm synthesizes proprietary information generated by its team. This allows Norm to:
   a. create sophisticated compliance tools that go beyond what is available from public regulations alone;
   b. provide its clients with deep insights into industry norms.
3. A well-connected team of experts – Norm’s sophisticated, cutting-edge solution is backed by an exceptional team with the perfect blend of tech and legal experience.
   
   Founder and CEO John Nay earned a PhD in machine learning from Vanderbilt University, then did a post-doctoral fellowship at NYU and is now a Research Fellow at CodeX, the Stanford University Center for Legal Informatics — in addition to teaching courses on AI and Law and publishing dozens of academic articles on the subject. Prior to launching Norm Ai, he was co-founder and CEO of AI-powered investment platform Brooklyn Investment Group, where he remains the Chairman.
   
   The rest of Norm’s growing team of AI researchers, AI engineers and lawyers has deep and specialized experience in their own right, as does the company’s Regulatory Advisory Board of former government regulators, corporate legal counsels and more. Together, the Norm team is building strong relationships with regulators and clients alike.

Five months after emerging from stealth, Norm Ai is well on its way to reaching that future. Having launched its first Regulatory AI Agents to address compliance with regulations of content related to asset managers, broker dealers and insurance companies, the company already boasts several large financial services firms as clients — a client base we expect to grow rapidly as the company demonstrates its value-add and rolls out Agents for additional regulations, industries and geographies. As numerous “GenAI fintechs” strive to beat out incumbents by building AI-native solutions that address specific use cases and workflows, Norm Ai has positioned itself well to win in the compliance automation space.

Given its compelling offering for this emerging category, expert team and vast addressable market, we are delighted to announce our investment in Norm Ai’s Series A round — led by Coatue with participation from Blackstone Innovation Investments, Bain Capital Ventures, New York Life Ventures, TIAA Ventures and Jefferson River Capital, the family office of Tony James, the former President and COO of Blackstone. We look forward to a long and fruitful partnership with Norm Ai, exploring the intersection of GenAI and compliance. Our congratulations to John and the entire team.