AI-Powered Document Review

25.02.2025, by iconicchain

Our AI-driven tools – we like to call them AI assistants – have been helping our customers with auditing and information extraction, alongside other solutions that help companies streamline compliance and operational processes. Document review – especially for compliance – is one of the most time-consuming and error-prone challenges companies face. How long does reviewing contracts, comparing them with legal requirements, identifying mistakes, and suggesting improvements take? AI can complete this process in minutes, improving accuracy and allowing employees to focus on higher-value tasks.

Let’s consider a real-world example: a company reviewing a dozen employment contracts to ensure compliance with labor laws. Manually identifying inconsistencies takes hours and risks human error. Businesses need a more efficient and smarter way to ensure contracts comply with legal requirements while saving valuable time and resources.

The Solution: AI-Assisted Document Review

Our Private AI Assistant geared towards document processing also includes capabilities for contract review and legal compliance. Our system can process e.g. employment contracts, cross-references them with laws, and highlights any discrepancies. Instead of spending hours manually reviewing documents, employees can receive a detailed AI-assisted report in minutes.

Why Large Language Models (LLMs) Alone Aren’t Enough

You may already be familiar with Large Language Models (LLMs) like ChatGPT and their ability to analyze text. While LLMs are powerful, they have limitations when used in their pure form:

Lack of Up-to-date Knowledge – LLMs are trained on a fixed dataset and may not have the latest legal updates. Training the model every time a law changes requires significant resources.
Hallucinations – LLMs sometimes generate convincing but incorrect responses, leading to potential compliance risks.
No Direct Document Reference – LLMs can summarize and analyze text but struggle to provide precise links to sources.
Security Risks – ChatGPT and similar models operate in the cloud, which can cause privacy and security concerns. In contrast, we use local models, ensuring that sensitive data is never sent externally and is always kept secure.

To overcome these limitations, we enhanced our AI assistant through the use of Retrieval-Augmented Generation (RAG).

What is RAG?

Retrieval Augmented Generation (RAG) is an advanced AI technique that combines the power of language models with real-time information retrieval. Instead of relying solely on pre-trained knowledge, RAG retrieves the most relevant external documents, safely and privately stored in a local database, before generating responses, which also occurs locally. By retrieving relevant information from a knowledge base and incorporating it into the response generation process RAG significantly reduces the risk of generating hallucinations. This approach ensures accuracy, security, transparency, and compliance.

How RAG Enhances AI-Powered Document Review

The diagram below illustrates how RAG improves legal document analysis:

Document Upload – The user uploads a document, e.g. an employment contract.
Contract Breakdown – The system divides the document into sections for separate analysis.
Retrieval Process – The system retrieves the most relevant legal provisions from a knowledge base containing current labor laws.
Comparison & Response Generation – The Private AI Assistant compares the section of the contract with information retrieved from the local knowledge base and generates a conclusion with an explanation. Our AI system ensures privacy and security by running entirely locally, without sending a query to an external cloud.
Human Review – The user receives a compliance report, allowing for a final human review. The relevant information from the knowledge base used by AI to generate a response can also be provided to the user.

Using RAG, our AI assistant ensures that contract analysis is up-to-date, precise, and legally compliant. However, the final decision is left to the employee, who has full control over the report. They can accept, modify, or decline the AI’s suggestions, check the sources, and add comments to ensure the final output meets their standards.

Examples

Below are sections of an employment contract that contain both compliant and non-compliant elements with labor laws (of one country).

Why It Matters

By automating this process, companies can reduce human error, ensure compliance, and free up employees for more strategic tasks. The AI assistant enhances the efficiency of legal experts by providing a first-level review, enabling them to focus on the most critical aspects of their work. Experts retain full control over the process and can make adjustments as needed.

AI-driven tools like ours are already playing a crucial role in modern workplaces, transforming tedious document review into a thing of the past.