Shadow AI Is Already Handling Your Clients’ Financial Data

Half of Australian and New Zealand organisations are running AI with no oversight at all, according to new KnowBe4 research reported by SMBtech. Sixty-four per cent of ANZ organisations now run autonomous AI agents that can take actions on their own, yet 50 per cent say their AI use is entirely unapproved or ungoverned. Worse, 59 per cent of staff admit they go and find their own AI tools when the approved ones fall short, and 57 per cent deliberately work around security controls to get things done faster.

Why This Hits Wealth Firms Harder

For a financial advice practice, “ungoverned AI” is not a productivity footnote — it’s client money and client data walking out the door. Here’s the pattern we see in Australian wealth and financial-services environments: a busy adviser or paraplanner pastes a client’s statement of advice, a super rollover summary, or a full transaction history into a free public chatbot to “just summarise this,” with no idea the data may be retained or used to train a model. That single copy-paste can breach your Privacy Act obligations, your AFSL conduct requirements, and your clients’ trust in one move — and nobody logged it happening.

The compliance stakes are what make this different from a generic AI-hygiene lecture. Financial data carries data-sovereignty and record-keeping obligations that a marketing team’s ungoverned ChatGPT use simply doesn’t. If you can’t say where your client data has been, you can’t attest that it’s protected — and “an adviser was using an app we didn’t know about” is not a defence the OAIC or ASIC will accept.

What To Actually Do

• Find out what’s already in use. Ask your team, plainly and without blame, which AI tools they use and what they paste into them. You can’t govern what you can’t see.
• Give them a sanctioned option. People reach for shadow AI because the approved path is missing or clunky. Stand up an enterprise AI tool with data controls so there’s a safe, easy default.
• Put the rule in writing. A one-page AI use policy naming what can and can’t go into public tools — client data, SOAs and account details firmly in the “never” column.
• Add technical guardrails. Data-loss prevention and browser or M365 controls that flag or block sensitive data leaving for unapproved services, so the policy isn’t just a PDF nobody reads.

You don’t fix shadow AI by banning AI — staff will just hide it better. You fix it by making the safe path the easy path, then watching the edges. We help Australian wealth and financial-services firms put governed AI in place and lock down where client data can travel. If you’re not sure what your team is already feeding into public tools, our financial services IT team can map it with you.

Written by Michael Sacco, Head of Service Delivery, All IT Services. All IT is a Sydney-based managed IT provider supporting businesses across financial services, hospitality, and not-for-profit sectors from its Brookvale base.

Frequently Asked Questions: Shadow AI