Compliance, Due Diligence, and Workflows

The Compliance Challenge

In the previous lesson, we explored client communication and plain language. Now let’s build on that foundation. A compliance officer at a financial services firm described her daily reality: dozens of regulations, multiple regulatory bodies, constant changes, and the expectation of perfect compliance across a thousand-page policy manual. Miss one item and the consequences can be severe—fines, sanctions, or worse.

This is where systematic AI workflows shine. Not because AI understands regulations better than a compliance professional, but because AI doesn’t get tired, doesn’t skip steps, and doesn’t forget to check item 47 on a 50-item list at 6 PM on a Friday.

Compliance Checklist Workflows

Building a Compliance Checklist

Create a comprehensive compliance checklist for:

INDUSTRY: [Industry]
JURISDICTION: [Federal/state/international]
COMPANY TYPE: [Size, structure]
AREA: [Specific compliance area—data privacy, employment,
financial, environmental, etc.]

For each requirement:
1. Regulatory source (statute, regulation, guidance)
2. Specific obligation (what must be done)
3. Frequency (one-time, annual, ongoing)
4. Documentation required (what records to keep)
5. Deadline or timing requirement
6. Penalty for non-compliance
7. Responsible party (who typically owns this)

Organize by:
- Regulatory body
- Priority (critical / important / routine)
- Frequency (daily / monthly / quarterly / annual)

NOTE: I will verify all regulatory citations
against official sources.

Data Privacy Compliance Example

Create a data privacy compliance checklist:

REGULATIONS: GDPR, CCPA/CPRA, [others relevant]
COMPANY: [Anonymized description—size, data types, markets]

Check categories:
1. DATA MAPPING
   - What personal data is collected
   - Where it's stored
   - How it's processed
   - Who has access
   - Cross-border transfers

2. LEGAL BASIS
   - Consent mechanisms
   - Legitimate interest assessments
   - Contract necessity evaluations

3. INDIVIDUAL RIGHTS
   - Access request process
   - Deletion process
   - Portability process
   - Opt-out mechanisms

4. SECURITY
   - Technical measures
   - Organizational measures
   - Breach response plan

5. DOCUMENTATION
   - Privacy policy
   - Processing records
   - Impact assessments
   - Vendor agreements (DPAs)

For each item: current status (compliant/gap/unknown),
priority, and recommended action if non-compliant.

Quick check: Does your organization or client have a systematic compliance checklist, or are requirements tracked informally? Systematizing the checklist is often the highest-value first step.

Due Diligence Frameworks

M&A Due Diligence

Create a due diligence request list for:

TRANSACTION TYPE: [Asset purchase / stock purchase / merger]
TARGET COMPANY: [Anonymized description—industry, size]
AREAS OF CONCERN: [Any specific risk areas]

Organize the request list by category:

1. CORPORATE
   - Formation documents
   - Organizational structure
   - Minutes and resolutions
   - Stock/membership records

2. FINANCIAL
   - Financial statements
   - Tax returns and audits
   - Debt instruments
   - Material contracts

3. EMPLOYMENT
   - Employee agreements
   - Benefit plans
   - Pending claims/litigation
   - Key employee identification

4. INTELLECTUAL PROPERTY
   - Registered IP
   - License agreements
   - Trade secrets/proprietary info
   - IP assignments

5. LITIGATION
   - Pending litigation
   - Threatened claims
   - Regulatory investigations
   - Insurance claims history

6. REGULATORY
   - Licenses and permits
   - Compliance history
   - Government contracts
   - Environmental matters

7. REAL PROPERTY
   - Leases
   - Owned property
   - Encumbrances
   - Environmental reports

For each item: priority level, typical red flags,
and follow-up questions if the document reveals concerns.

Document Review and Flagging

When you receive due diligence documents:

Review this document for due diligence purposes:

DOCUMENT TYPE: [Type of document]
CONTEXT: [How it relates to the transaction]
KEY CONCERNS: [What I'm specifically looking for]

Analyze for:
1. Terms that deviate from standard/market
2. Change of control provisions
3. Assignment restrictions
4. Termination or acceleration triggers
5. Unusual obligations or restrictions
6. Missing provisions that should be present
7. Potential liability exposure

Rate each finding:
- RED FLAG: Requires immediate attention / deal risk
- YELLOW FLAG: Needs further investigation
- NOTE: Worth knowing but not immediately concerning

Due Diligence Summary Reports

After reviewing multiple documents:

Synthesize due diligence findings:

TRANSACTION: [Anonymized description]
DOCUMENTS REVIEWED: [Number and categories]

FINDINGS:
[Paste your organized findings from document reviews]

Create a due diligence summary report:

1. EXECUTIVE SUMMARY
   - Overall risk assessment (low/medium/high)
   - Top 5 issues requiring attention
   - Recommended conditions to closing

2. CATEGORY-BY-CATEGORY ANALYSIS
   - Key findings per area
   - Risk level per area
   - Recommended actions

3. RED FLAGS
   - Issues that could affect deal valuation
   - Issues that could block closing
   - Issues requiring indemnification protection

4. MISSING INFORMATION
   - Documents not yet received
   - Questions still outstanding
   - Areas requiring further investigation

5. RECOMMENDATIONS
   - Pre-closing actions required
   - Representations and warranties to include
   - Indemnification provisions to negotiate
   - Post-closing integration considerations

Building Repeatable Workflows

The Workflow Template

For any recurring legal process, create a workflow:

Design a repeatable workflow for [process]:

PROCESS: [e.g., New client intake / Contract review /
Regulatory filing / Litigation hold]

For each step:
1. STEP NAME and description
2. INPUTS required (documents, information, approvals)
3. AI-ASSISTED TASKS (what AI helps with)
4. HUMAN JUDGMENT POINTS (where professional judgment is needed)
5. QUALITY CHECKS (verification and review steps)
6. OUTPUTS produced (documents, decisions, communications)
7. ESTIMATED TIME (with AI assistance)
8. COMMON PITFALLS (what to watch for)

Example: New Matter Intake Workflow

NEW MATTER INTAKE WORKFLOW

Step 1: Conflict Check
- Input: Potential client and adverse party information
- AI task: Draft conflict search parameters
- Human judgment: Evaluate potential conflicts
- Output: Conflict clearance memo

Step 2: Client Research
- Input: Client name and business description
- AI task: Compile public background information
- Human judgment: Evaluate client suitability and risk
- Output: Client profile summary

Step 3: Engagement Terms
- Input: Scope of work, fee arrangement, special terms
- AI task: Draft engagement letter from template
- Human judgment: Customize terms, review risk allocation
- Output: Engagement letter for client signature

Step 4: Matter Setup
- Input: Signed engagement letter
- AI task: Generate matter memo and initial work plan
- Human judgment: Approve work plan, assign team
- Output: Matter opened, team notified, initial deadlines set

Contract Review Workflow

CONTRACT REVIEW WORKFLOW

Step 1: Initial Assessment (10 min)
- AI: Executive overview and structure analysis
- You: Confirm deal context and priorities

Step 2: Risk Scan (15 min)
- AI: Flag high/medium/low risk provisions
- You: Prioritize issues based on deal dynamics

Step 3: Detailed Analysis (30-60 min)
- AI: Clause-by-clause analysis of flagged sections
- You: Apply judgment, assess acceptability, note negotiation points

Step 4: Comparison (15 min)
- AI: Compare against your standard template
- You: Decide which deviations to accept, negotiate, or reject

Step 5: Redline Generation (20 min)
- AI: Draft proposed redline language
- You: Refine language, add strategic comments

Step 6: Communication (10 min)
- AI: Draft summary for client/team
- You: Review and send

TOTAL: 1.5-2.5 hours vs. 4-8 hours without AI

Regulatory Monitoring

Stay current without drowning in updates:

Create a regulatory monitoring framework:

CLIENT/COMPANY: [Anonymized description]
RELEVANT REGULATORY AREAS:
- [Area 1: e.g., Data privacy]
- [Area 2: e.g., Employment law]
- [Area 3: e.g., Industry-specific regulation]

JURISDICTIONS: [Federal, state(s), international]

For each area:
1. Key regulatory bodies to monitor
2. Types of changes to watch for (rules, guidance, enforcement)
3. Sources to check (Federal Register, state equivalents, agency websites)
4. Impact assessment template (when something changes)
5. Client communication template (how to notify of changes)
6. Compliance update checklist (what to review internally)

Exercise: Build a Workflow

Choose a process you perform repeatedly:

Map out every step in your current process
Identify which steps AI can assist with
Design the AI-assisted workflow using the template
Estimate time savings per iteration
Create the prompts you’ll use at each AI-assisted step
Test the workflow on a real matter

Key Takeaways

Compliance checklists ensure nothing is missed—AI doesn’t get tired at step 47
Due diligence benefits from AI triage: categorize, flag, and prioritize for human review
Every recurring legal process should have a defined workflow with AI-assisted and human judgment steps
The value of AI in compliance is consistency and completeness, not replacing professional judgment
Regulatory monitoring frameworks prevent clients from being surprised by legal changes
Workflow templates compound savings—build once, use hundreds of times

Next: your capstone project—completing a full legal analysis using everything you’ve learned.

Up next: In the next lesson, we’ll dive into Complete a Legal Analysis Project.