Shadow AI on Trial: The Phantom Threat to Compliance
Every law firm I meet can explain its information security policy in minutes. Far fewer can tell me which AI tools their staff actually used last week, and what data those tools touched. That gap is where Shadow AI sits, such as unsanctioned, unmonitored use of generative AI slips in. It promises speed, but it quietly creates exposure: confidentiality breaches, weak auditability, and a risk to governance when the regulator (or a client’s GC) asks hard questions.
This is not a theoretical risk. The 2025 Legal Industry Report surveyed 2,800+ legal professionals and found 31% personally use generative AI at work, rising to 39% in firms with 51+ lawyers, while only 21% of law firms have officially adopted generative AI. In other words, individual use is outpacing firm policy—which is precisely how Shadow AI is born.
(Sources: ABA Law Technology Today; ABA Journal / MyCase.)
What “Shadow AI” Looks Like in the Wild
Based on conversations with our customers, here’s how Shadow AI commonly appears:
- An associate pastes a sensitive chronology into a public chatbot to “tighten the prose.”
- A partner uses a browser plug-in that auto-summarizes document content, with unclear data handling.
- A paralegal experiments with a consumer translation AI on client IDs to speed intake.
Each micro-decision seems harmless; collectively they create untracked data flows, unknown retention, and no defensible record to show regulators or clients how you protected confidentiality and ensured proportionality. That’s not just a security problem, it’s a governance problem squarely in scope of SRA and GDPR.
(References: SRA—Technology and legal services; ICO—data protection principles)
Gaining Control and Clarity
To get ahead of Shadow AI, you need visibility you can trust. That’s what Managed Digital Experience (DEX) is designed to deliver:
- Measure real AI usage: Track AI tool access by URL and application behavior, flag unsanctioned tools, and correlate device health with productivity so you can distinguish sanctioned “Copilot-in-Word” activity from rogue browser extensions.
- Document adoption & enforce policy: Managed DEX provides dashboards, alerts, and scheduled reports that surface emerging tools, who’s using them, and where policy exceptions are creeping in, giving Risk, IT, and InfoSec a common cockpit.
- Prove safeguards are in place: Monthly insights and evidence packs help you demonstrate appropriate organizational measures under GDPR Article 32 and support SRA’s outcome-based expectations around competence and supervision.
- Shine a light on Shadow AI: Our legal IT survival content makes this explicit, Managed DEX uncovers under-the-radar SaaS and Shadow AI creeping into daily workflows before it becomes tomorrow’s client letter or regulatory inquiry.
Of course, sanctioned AI can be a real productivity boost, so for firms piloting or using Microsoft Copilot (or similar), we’ve also built storyboards to monitor Copilot adoption alongside other AI endpoints, so leadership can evidence benefit while controlling sprawl.
Ready to bring Shadow AI out of the dark?
Book a 30-minute consultation with Teneo’s experts to see how Managed DEX can give your firm full visibility, control, and compliance confidence, without slowing innovation.
Schedule your consultation now.
Author:
Brett Ayres, CTO, Teneo