What Should a Law Firm Consider?
Introduction
Artificial Intelligence (AI) is gaining a lot more attention in the legal sector as more Firms turn to forms of AI to assist in a variety of tasks.
Concerns are starting to be raised about the impact of over-reliance on AI and how this may influence poor behaviour and complacency, which could lead to claims.
This article is designed to assist Firms in deciding whether AI is right for them and, if so, how they can control and manage the solutions deployed to remove or at least reduce the risks involved.
Implementing AI tools into your Firm is not a decision to be taken lightly. Insurers are starting to consider the risks associated with the use of AI, and for the first time, they are seeking more information via proposal forms asking questions about its use.
It has to be remembered, at all times, that the final output of advice provided by a Firm is what they will be judged on. Regardless of the research of the source, if the Firm gets it wrong and negligence arises, it does not matter that the AI Solution erred. Only the Firm will be held accountable, and there will be scrutiny of the policies and controls around the use of AI.
How is AI Used In Law Firms?
AI is the use of machines to simulate human intelligence through the use of datasets and algorithms to identify patterns and predict outcomes.
In law firms, Artificial Intelligence (AI) is primarily used to automate repetitive tasks such as document generation, document review, legal research, and analysis. The aim is to allow fee earners to focus more on strategic aspects of client matters by improving efficiency and productivity, whilst also providing insights through predictive analytics based on large data sets of past cases and legal precedents.
Generative AI is often used in law firms to assist with the creation of documents. Generative AI learns from large amounts of data (such as books, articles, and social media posts) and uses it to create content by predicting the most likely information to be used. Generative AI needs to be provided with instructions and can be further trained to improve its accuracy.
The SRA & AI
Currently, there is little guidance offered by the Regulators. However, in 2023, the SRA issued a paper on the Use of AI in the Legal Market –
https://www.sra.org.uk/sra/research-publications/artificial-intelligence-legal-market/.
The SRA’s paper sets out that 60% of larger law firms were at least exploring the use of AI, and 72% of financial service Firms were already engaging with it. The SRA recognises AI is growing rapidly, and as more systems are brought into the market, the more it will get deployed. It claimed to have “an open mind on the systems used, balancing protections for consumers with support for innovation”.
In 2024, we received weekly requests to assist in the drafting of AI-based solutions and policies, and were asked to offer guidance on how to effectively implement risk control AI solutions.
It is clear that AI is becoming increasingly popular, and it is understandable why Firms are considering its usage. However, its implementation must be considered carefully.
The Risks of Using AI
There are various risks to utilising AI. Firms that deploy such systems must implement control measures and issue clear guidance to their staff on how to engage with and use such systems.
- Flaws with the systems (all of which must be addressed) can include (but are not limited to):
- Inaccurate or misleading information being collated and presented.
- Hallucinations – AI can generate incorrect or fabricated information, known as “hallucinations”. AI hallucinations can occur when:
- AI models misapply learned patterns or make confident predictions based on flawed data. These are known as ‘processing errors’.
- AI models don’t understand the context of a prompt or misidentify patterns. This is known as ‘misunderstood context’.
- AI models draw from limited or biased data to generate an output. This is known as ‘limited data’.
- ‘Algorithmic bias’ – AI can be biased if the data used to train it is biased. This can lead to unfair or incorrect outcomes.
- Breach of confidentiality – AI often requires access to large amounts of personal data, which can be mishandled or shared improperly.
- Loss of human interaction – relying too much on AI can damage the Solicitor-client relationship.
- Copyright Issues.
- Failure to follow regulatory requirements by preferring data sets that have not considered the requirements of the regulator.
- Presentation of inaccurate information, which has not been checked (particularly cross-jurisdictional information).
- Insufficiently trained staff.
- Unauthorised sharing of data by the AI solution without the consent of the Firm or the Client, whether deliberate or not.
It is important that ALL FIRMS devise strategies to recognise these risks and implement procedures to ensure all AI solutions are properly managed and controlled.
AI Policy & Controls
If a firm is using AI, it will need a policy which clearly sets out the rules of engagement. Such a Policy will need to cover:
- Officers and Responsibility
- Who does this Policy apply to?
- What is Artificial Intelligence?
- Utilisation of AI in the Firm
- Risks of Using AI in Law Firms
- Use of AI in the Firm
- Risk Management and Control
- Monitoring and Regulation (the Firm and Third Parties)
- Record Keeping
- Training
- Breaches and Reporting
- Register of Approved AI Solutions
Each of these areas considers the key issues and will help set out the appropriate requirements.
Not having a Policy is an error. Allowing staff to use AI solutions without proper approval or sufficient training is to be discouraged. It is, therefore, essential to:
- Understand why AI is needed in your Firm.
- Identify the Benefits.
- Identify what systems will be allowed, and build a list of approved systems.
- Vet and approve the systems
- Ensure staff are trained on its use.
- Decide how you will monitor quality.
- Decide who will supervise the solutions.
- Include AI use as part of standard file review functions.
- Ensure all staff know the rules of engagement.
Allowing AI to be used in the Firm in an uncontrolled way does not address the risks and will expose the Firm to negligence and potential regulatory breaches.
We believe AI has its place in the future of Law, but it must be controlled.
Solutions
We work with many firms to provide outsourced risk and compliance solutions. AI is a feature of our standard service that is used when firms require an approach.
For more information on the Regulation & Compliance Office, and to discuss how we may be able to assist in accelerating your risk management or compliance, call us on 0203 985 8550 or email us at info@regulationandcomplianceoffice.co.uk
RACO Risk & Compliance Support
All firms must demonstrate and uphold high standards in their AML systems and processes, as well as in their management and supervision. This also involves outlining how the firm operates, including the conduct of staff through set policies, controls and procedures.
At the Regulation & Compliance Office, we can offer a number of outsourced support solutions, including:
- Regulation & Compliance Service – Our Risk Management Assessment Service has been specifically designed to review and update a firm’s approach to risk and compliance management.
- MLR 2017 Regulation 21 Independent Audit – A review of the firm’s approach to regulation and compliance, including AML procedures, with the audit meeting the requirements of Regulation 21 of AML 2017. The output provides the firm with a written gap analysis and solutions to remedy any issues and ensure compliance.
- AML Training Courses – Our Typical AML Training Includes:
- AML Training for ALL staff to meet the firm’s obligation to provide annual training.
- One-to-one training for the MLRO and MLCO on their obligations and requirements.
