AI Governance for General Counsel: Mitigating Litigation and Compliance Risks

This article provides guidance for general counsel on how to manage AI-related risks without stifling innovation. It covers the evolving regulatory landscape, security incidents, legal implications, and a framework for building accountable AI systems.

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The article highlights the growing regulatory pressure on general counsel to approve and oversee AI systems that impact millions of customers and vast data stores. The risk is not with AI itself, but with opaque decision-making, uncontrolled data flows, and unclear accountability. Regulators are moving from policy papers to enforcement, with the EU AI Act and similar regimes enabling fines in the tens of millions. In the financial sector, UK regulators will govern AI through existing conduct, disclosure, and prudential rules. Failures will be treated as mis-selling, unfair treatment, or resilience gaps, not exotic 'AI accidents'. The article recommends building 'decision-traceable' AI agents that emit an audit trail of inputs, reasoning, and outputs. It also advocates adapting the 'Three Lines of Defense' model to AI, with the first line (business/product teams) owning risk assessments and controls, the second line (risk, compliance, privacy) challenging those assessments, and the third line (internal audit) validating adherence to policies and regulations.