Hidden Dangers: Shadow IT and Unapproved Use of Generative AI in Legal Work

 
 

In today’s fast-paced legal environment, firms are increasingly seeking innovative ways to streamline operations, improve research efficiency, and reduce costs.

One of the most talked-about advancements in recent years is the rise of Generative AI (Gen AI) solutions, which promise rapid document drafting, contract analysis, and legal research support. While the potential benefits are enormous, so are the risks, especially when employees use unapproved Gen AI tools without the firm’s knowledge or oversight. This growing trend, often referred to as “Shadow IT,” poses significant security, ethical, and compliance challenges.

 

The stakes for law firm leaders and partners couldn’t be higher. Understanding the pitfalls of shadow IT is essential to protecting the firm’s reputation, client confidentiality, and compliance with industry regulations.

What is Shadow IT, and Why Should Law Firms Care?
Shadow IT refers to the use of unauthorized software, tools, or applications by employees without the approval or knowledge of the firm’s IT department. While this concept isn’t new, the recent surge of AI-driven tools—many of which are readily available, easy to access, and free—has made shadow IT more prevalent than ever in the legal sector.

Legal professionals are using generative AI solutions like AI writing tools, document summarizers, and research to speed up their work. These tools, however, are often unvetted, meaning they may lack the necessary security protocols, data privacy safeguards, or compliance measures required for sensitive legal work.


The Risks of Shadow IT in Law Firms

  1. Data Security and Confidentiality Breaches
    Law firms are entrusted with highly sensitive information—client data, case strategies, financial records, and more. When legal professionals use unapproved Gen AI tools, they often upload confidential information into third-party systems.
    The problem? Most consumer-grade AI tools do not guarantee data confidentiality. Once information is shared, it may be stored, reused, or even exposed in a data breach. This poses significant risks of violating client confidentiality obligations and can lead to severe reputational damage.

  2. Regulatory and Compliance Violations
    Law firms must adhere to strict regulatory frameworks such as GDPR, HIPPA (for healthcare-related cases), and industry-specific confidentiality rules. Shadow IT tools rarely meet these compliance standards, exposing the firm to potential fines, legal action, and disbarment risks.
    Example: A well-meaning associate might use a free AI-powered transcription service to summarize a client meeting, unknowingly violating data protection laws.

  3. Loss of Control Over Client Data
    Unapproved tools often come with vague or confusing data policies. Some generative AI tools retain input data for “training purposes,” which means your confidential legal content might be stored indefinitely and potentially reused to improve the AI’s performance. For law firms, this loss of control can have devastating consequences.

  4. Inaccuracy and Lack of Reliability
    While generative AI tools can be powerful, they are not infallible. These tools sometimes generate hallucinations—false information presented as fact. When employees rely on unapproved AI to generate legal documents or conduct research, errors can slip through, jeopardizing the integrity of the work and increasing the firm’s liability.

  5. Ethical Concerns and Professional Responsibility
    The American Bar Association (ABA) and state bar regulators stress that lawyers have a duty to maintain technological competence, safeguard client information, and supervise the use of AI-assistants.  Unapproved AI usage violates these ethical obligations and can undermine the client’s trust in the firm. If errors or breaches occur, the consequences could include malpractice claims and disciplinary actions.


Why Employees Turn to Shadow IT: The Appeal of Generative AI
It’s important to understand why employees might resort to using unapproved tools in the first place. Often, it’s not out of malice or negligence but rather the pressure to perform quickly and efficiently in a demanding work environment.

Key Drivers:

  • Time Pressure: Lawyers and paralegals are under constant pressure to meet tight deadlines. Generative AI tools offer “instant” solutions, significantly reducing research and drafting time.

  • Ease of Access: Most AI tools are just a click away. With no need for IT approval or lengthy implementation processes, employees can start using them immediately.

  • Lack of Awareness: Many employees may not fully understand the risks associated with using unapproved technology or assume that AI tools are inherently safe.

  • Inadequate Firm-Sanctioned Alternatives: If a firm does not provide its employees with approved and secure AI solutions, they may seek external tools to fill the gap.


How Law Firm Leaders Can Mitigate the Risks
Preventing shadow IT requires a proactive, multi-faceted approach. Here’s how law firm leaders can safeguard their firms while still encouraging innovation and efficiency.

1. Develop a Clear Policy on Technology Usage

Create a comprehensive technology usage policy that outlines:

  • Approved AI tools and software

  • Rules on data handling and client confidentiality

  • Requirements for human review and verification of accuracy

  • Consequences for violating the policy

Ensure the policy is easy to understand and accessible to all employees. If you want to develop one, you can start by checking out the model acceptable use policy on our website.

2. Raise Awareness and Educate Employees

Many legal professionals are unaware of the potential risks of using unapproved tools. Conduct regular training sessions to inform attorneys, paralegals and staff about:

  • The dangers of shadow IT

  • Ethical and compliance risks

  • Firm-approved alternatives for AI-driven legal tasks

3. Provide Approved and Secure Alternatives

One of the most effective ways to reduce shadow IT is to offer firm-approved, secure AI solutions. If employees have access to reliable, compliant tools, they are far less likely to turn to risky alternatives. Work with your IT department and external consultants to vet and implement solutions that meet the firm’s needs.

4. Monitor and Audit IT Usage

Regular audits can help identify unauthorized tool usage. Leverage monitoring tools to track what applications employees are using and address any risks that arise. Be sure to do this in a way that respects employee privacy while protecting firm data.

5. Foster a Culture of Open Communication

Employees are less likely to circumvent IT policies if they feel comfortable discussing their technology needs with firm leadership. Encourage open dialogue and make it clear that the firm supports innovation—just in a safe and compliant manner.

The Bottom Line

Shadow IT and unapproved generative AI tools are a growing concern for law firms. While the allure of instant productivity gains is understandable, the risks far outweigh the benefits. Law firm leaders must take a proactive role in educating their teams, developing robust policies, and providing secure alternatives to ensure that innovation does not come at the cost of security, compliance, or client trust.

By addressing shadow IT head-on, firms can embrace the power of generative AI without compromising on their professional responsibilities or ethical obligations.

 
 

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James Chapman