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Shadow AI: The Silent Compliance Risk Advisors Are Ignoring
- MMiller
- 22 hours ago
- 2 min read
Mini Case Study: How One Innocent ChatGPT Query Triggered a Compliance Issue
The “Helpful” ChatGPT
Background:A mid-level advisor at a growing RIA was struggling to create a follow-up email after a complex client meeting. To save time, he pasted his rough notes into ChatGPT.
He didn’t include full client names or account numbers — just:
Age range
Investment goals
Planning issues
Portfolio structure
Risk tolerance
A summary of the client’s concerns
ChatGPT generated a clean, polished email. He copied it, tweaked it, and sent it to the client.
Simple. Efficient. Innocent… right?
Not exactly.
🚨 The Problem: No Audit Trail
During a routine internal audit, compliance flagged the email. It wasn’t the content — it was the process.
There was no record of how the message was created.
No documented version history.
No draft stored in the CRM.
No adviser notes showing how the recommendations were formulated.
No way to verify that no sensitive data was shared externally.
The compliance officer’s questions were straightforward:
“Where did this email come from?”
“How was the summary generated?”
“Was any client data entered into an unapproved AI tool?”
“Where is the audit trail?”
The advisor couldn’t answer.
The Consequences
The firm didn’t fire him — but they did:
Issue a compliance warning
Require remedial training
Ban use of public AI tools for three months
Audit his full email history
Delay his client assignments during review
This was not a malicious act. It was a lack of process.
The advisor’s intent was to help the client faster. But intent doesn’t protect you from compliance rules.
The Lesson: AI Isn’t the Risk — Shadow AI Is
The issue wasn’t ChatGPT.
It was:
No approved workflow
No data-anonymization
No documentation
No version control
No recordkeeping
No visibility for compliance
AI becomes risky only when it’s used in the shadows.
Safe AI Use Requires 3 Things
An approved tool or workflow
If your firm hasn’t established guidelines, push for them.
Data protection rules
Remove personal identifiers before placing anything into AI.
An audit trail
All draft outputs should be stored in:
✔ Your CRM
✔ Your document archive
✔ Your compliance system
Not inside the AI platform.
Learn more about compliant AI workflows:
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