Organizations are accelerating AI adoption in the name of productivity and progress, without considering the underlying compliance risks. Data breaches, muddied or non-existent audit trails, and hallucinated outputs are all common issues associated with unvetted and insecure AI tools. All of which can lead to audit failures and regulatory fines. To prevent this, organizations must invest in secure, audit-ready AI tools.
In the last year alone, organizations have broadened worker access to AI by 50%.
Though this rapid adoption brings the promise of substantial productivity gains and cost savings, it also carries a concerning level of risk. At the time of writing this article:
All of this is feeding into a huge compliance black hole, which will only grow as AI usage scales. Without intervention, organizations risk not only their customers’ privacy and security, but their regulatory standing.
Needless to say, productivity must never come at the expense of compliance and auditability. Especially for heavily regulated organizations. An hour saved now isn’t worth the reputational damage or financial penalties faced further down the line.
In this article, we investigate the common compliance faults with ungoverned AI tools and break down the qualities of “audit-ready” platforms. Helping you adopt AI in a scalable and compliant way.
Your annual audit rolls around. You’ve updated your policies, signed off the approved versions, and distributed them across your network. Every employee has retaken and passed their compulsory training modules. 99% of your operations are completely watertight and ready for scrutiny… But, at the final hurdle, you AI tools let you down.
Here’s the most common reasons why ungoverned AI leads to regulatory non-compliance:
Many regulators, including the FCA, HIPAA, and SEC, demand a complete, searchable, and timestamped audit trail of any AI system that handles highly sensitive information, whether it’s PHI data or a customer’s financial history. This rule applies to more broader regulations, too, including the recent EU AI Act.
These audit trails act as infallible evidence of AI usage and subsequent human-based decisions. They add a necessary layer of accountability. If an AI tool gives one of your financial advisors incorrect or biased/discriminatory information, that is then passed on to a client, you must be able to prove why the AI generated that answer. (And, perhaps more importantly, why your employee used it.)
Unvetted “shadow AI” tools, or poorly vibe-coded systems, will not give you this rich audit trail. In turn, rendering your organization non-compliant.
In a vibe-coded or off-the-shelf AI tool, permissions are often an afterthought. This leaves a very obvious gap for data to fall through.
For example, consider the AI search functionality on your intranet or digital workplace. If the AI indexes every piece of information on your portal for everyone, junior or unauthorized persons may be able to access restricted data, files, employee records, or privileged HR disputes.
To comply with stringent regulations, your AI tools must authenticate users and provide role-based access to sensitive information. The more granular and intertwined the underlying permissions system, the less likely your data will fall into the wrong hands.
When using open source AI tools, such as ChatGPT or Perplexity, employees may not fully comprehend how their interactions are being processed. In the spur of the moment, it may seem perfectly harmless to enter customer data in order to streamline analyses, fast-track diagnoses, or speed-up content generation.
But, more often than not, this data is used to train the underlying model and may be accessible to unauthorized third parties. This is a significant data protection issue, and may amount to regulatory penalties.
All of this to say: any AI tools you build or authorize must not breach sensitive data or use it for training purposes. When allowing the use of commercially available software, provide employees with clear acceptable use policies and guidelines.
Ungoverned and commercially available AI tools index a wealth of publicly accessible information, some of which is accurate, some of which isn’t. They’re also prone to “hallucinating” and providing false information.
While this may be perfectly harmless for simple tasks, such as drafting an invite for a company social event, it can wreak havoc on your more critical business operations.
Take the legal industry as a sobering example. An increasing number of legal professionals use AI software to speed-up case work. This has resulted in an increase in falsified case-law citations and quotations, which put lawyers and their firms at risk of sanctions and police investigation.
Many lightweight AI APIs process data on global servers. If your industry and its regulators demand strict data sovereignty (for example, patient data must remain on servers within your country), routing internal documents through a public LLM API will result in an instant compliance breach.
It’s also worth noting that many foreign AI tools are not built with your local regulations in mind. So, if you’re a US-based healthcare provider using a Chinese-built AI tool, there’s a strong chance the platform won’t comply with HIPAA standards.
The goal isn’t to restrict AI usage or development, but rather to enforce it with the appropriate governance mechanisms. That way, you can satisfy employee demands and regulatory requirements.
With that in mind, here are 4 qualities of compliant, audit-ready AI platforms:
To prevent unauthorized data access, your platform must prove that its AI engine inherits role-based access rights — no matter how granular.
AI search and chat assistants should not surface highly-critical data for users who do not have access. Nor should they summarize sensitive documents for employees who ordinarily do not have clearance to open the source file.
As dictated by HIPAA, the EU AI Act, and other high profile regulatory frameworks, automated audit trails are non-negotiable.
Your AI tools must maintain a comprehensive log of every query made, the identity of the user, and the exact response or action made by the system for the sake of analysis, internal investigation, and regulatory audits.
AI hallucinations can be damning for your business’s reputation and your regulatory standing. To avoid false outputs and incorrect decisions, opt for AI tools that only index approved materials within your digital workplace solution.
The AI must also provide clear, linked citations in its responses, which lead users back to the original source (whether it’s a page, document, employee profile, or automated project).
When you update a document in your digital workplace solution, your AI must quickly change its behavior accordingly. This is especially true for compliance-related activities, such as policy management.
An AI chatbot that references and summarizes an out-of-date security policy may, by extension, lead to non-compliance throughout your teams and operations.
Claromentis has a 25-year track record of developing digital workplace and franchise management software solutions that meet the rigorous demands of heavily regulated environments.
Our AI isn’t a tacked-on afterthought. It blends end-user needs with stringent compliance requirements, resulting in tools that not only enhance productivity and enablement, but can streamline your regulatory audits, too.
Our optional AI search and chat assistants work in tandem with our comprehensive governance and security framework, providing:
All of this is built on Google’s secure Vertex AI, which provides enterprise-grade support and does not use your data to train its models. Should you wish to turn off any of these AI features, administrators can toggle a simple switch in the admin panel.
We also allow you to host our digital workplace and franchise management software solutions in an environment of your choosing — whether that’s in our secure SaaS environment, a private cloud, or on-premises. Allowing you to adhere to strict local data residency and sovereignty laws.
AI adoption has become a reckless race. A race to deliver the most innovative services, to supersede competitors, to pocket savings in times of economic difficulty… But, while speed of adoption is important, it should never come at the expense of compliance.
Instead of running your operations on fragile, insecure tools that are doomed to fail your regulatory inspections, invest in an inherently audit-ready platform like Claromentis. This ensures your AI adoption strengthens your risk posture, as opposed to destroying it.
To find out more about our secure, AI-enabled digital workplace and franchise management software solutions, book a quick requirements call with our team.